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schaeffer's market recap

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    Market Recap

    Positive economic news couldn’t even buoy the market this afternoon. The Conference Board announced today that U.S. consumer confidence rose to an 18-month high during January, but noted that consumers are still skittish about the labor market. The board's consumer confidence index rose to 96.8, up from 91.7 in December. Economists had expected the index to rise to about 98.1. The expectations index also increased to a 20-month high of 108.1 from 103.3, reflecting the growing optimism.

    From within the Dow Jones, Merck reported that fourth-quarter profits slid 26 percent, snipped by a decline in sales and charges related to recent job cuts. Despite this drop, MRK reassured investors that it expects profit growth in 2004. The company reaffirmed its expectations for full-year profits of $3.11-$3.17 per share. For the fourth quarter, the firm reported earnings of $1.4 billion, or 62 cents per share, missing the Street estimate by a penny and whiffing last year’s 83-cent profit.

    More earnings for the blue-chip sector had SBC Communications reporting a fourth-quarter profit of 27 cents per share, compared with 71 cents for the same quarter last year. Excluding one-time items, SBC posted a profit of 34 cents per share, in line with consensus estimates. Heavy equipment manufacturer Caterpillar hit a new 52-week high today after the company delivered upbeat fourth-quarter earnings at 97 cents per share or $6.47 billion. The figures handily bested analyst expectations for 94 cents per share. Looking ahead, CAT said it sees profits increasing approximately 40 percent for 2004.

    DuPont drifted lower after posting fourth-quarter earnings (excluding items) of 29 cents per share, beating forecasts for 25 cents per share, but missing last year’s 34 cents. DD also said it is predicting earnings of 65-75 cents per share for the first quarter, and $2-2.20 per share for the year versus current analysts' estimates of 68 cents and $2.09, respectively. Meanwhile, McDonald’s was among the few components to remain in positive territory after reporting fourth-quarter earnings last night of 35 cents per share, meeting the Street estimate. The fast-food behemoth easily surpassed its loss of 27 cents per share for the same period a year ago. Sales for the quarter soared 11 percent to $17.14 billion.

    The Dow Jones plunged 92.6 points (or 0.87 percent) in trading this afternoon, giving up most of yesterday’s gains as it pulls back toward support at its rising 10-day moving average. Within the blue-chip barometer, only General Electric, McDonald’s, Altria Group, Merck, and United Technologies finished the day in the positive column. Meanwhile, Caterpillar, IBM, Intel, and SBC Communications logged some of the largest losses.

    The tech sector had a rough day as it struggled to come to terms with some of the latest earnings releases. Altera failed to impress the Street this morning when it reported fourth-quarter earnings of 12 cents per share, besting the consensus estimate by a penny per shares. However, revenue for the quarter fell short of expectations. The company also announced plans to increase its share buyback program by 10 million shares. Novellus Systems also reported earnings of seven cents per share, surpassing the Street estimate of six cents per share. Shipments rose 8.5 percent from the third quarter. Sales for the quarter came in at $226.5 million, slipping past the Street estimate of $220 million. Despite these strong earnings, the stock plunged more than 14 percent after warning that operation cost and narrowing gross margins will cause earnings to fall short of the Street’s first-quarter estimate.

    The Nasdaq Composite tumbled almost 38 points (or 1.76 percent) this afternoon, closing below its 10-day moving average (at 2125) for the first time since December 17. The tech-laden index has additional support below at its 20-day moving average (at 2090).

    Levels to watch for in Wednesday's trading :

    Dow Jones Industrial Average (INDU) - support at 10,300; resistance at 10,795.5

    S&P 500 (SPX) - support at 1105, resistance at 1176.97

    Nasdaq Composite (COMP) - support at 2030; resistance at 2200
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