MW: U.S. stocks moderately higher; housing data clips early gains
By Kristina Peterson & Donna Kardos Yesalavich, MarketWatch
NEW YORK (MarketWatch) -- U.S. stocks clung to modest gains Monday, as concerns over global growth eased, but investors struck a cautious tone amid mixed company earnings and subdued housing data.
The Dow Jones Industrial Average (INDU 10,195, +21.69, +0.21%) was recently up 43 points, or 0.4%, to 10,217. Caterpillar (CAT 55.26, +1.01, +1.86%) led the measure, up 2.8%, as concerns about global growth eased. American Express (AXP 38.07, -0.52, -1.35%) dragged, with the credit card issuer down 0.9%, extending last week's losses.
Also dragging on the Dow, Kraft Foods (KFT 27.64, -0.23, -0.83%) fell 0.7%, after Italian confectioner Ferrero on Monday formally ruled out launching a rival bid for Cadbury PLC (CBY 53.44, -0.02, -0.04%) , paving the way for Kraft to complete its buyout of the U.K. company.
The Standard & Poor's 500-share index (SPX 1,097, +5.40, +0.50%) was up 0.5%, led by its materials and technology sectors. Consumer staples dragged on the measure. The Nasdaq Composite (COMP 2,208, +2.94, +0.13%) was up 0.5%.
Materials got a lift Monday after steelmaker AK Steel Holding (AKS 20.97, +0.78, +3.86%) swung to a fourth-quarter profit as the company saw shipments jump. AK Steel was up 5.8% recently.
Stocks dipped briefly after the National Association of Realtors released data showing that existing-home sales plunged in December after three straight-increases that were aided by a fat government tax credit.
Home resales fell by 16.7% to a 5.45 million annual rate from an unrevised 6.54 million in November, a bigger drop than the 11.6% decrease in sales expected by economists surveyed by Dow Jones Newswires. See story on home sales.
However, prices rose year over year for the first time in more than two years the percentage of distressed home resales, including foreclosures, has declined to 32%, after nearing 50% in late 2008 and early 2009.
Investors breathed calmer on Monday as officials over the weekend reiterated support for the re-confirmation of Fed Chairman Ben Bernanke. In the previous session, the Dow closed down 4% for the week, as investors fretted over Bernanke's prospects, U.S. bank restrictions posed by President Barack Obama and the potential for monetary tightening from China. See full story on Bernanke.
"Materials took a big hit last week directly related to China," said Gary Flam, portfolio manager at Bel Air Investment Advisors. "Cooler heads are prevailing this morning. China's not going to all of a sudden go into a recession. The question is how fast is China going to grow, not will they grow."
Further appeasing global jitters, the Greek government enjoyed a much-needed boost Monday as investors piled into its new €5 billion, five-year syndicated bond issue, registering more than €20 billion of orders in around three hours.
Still, plenty of investors think the market is in the early stages of a correction.
"The U.S. equity market is quite richly valued," said Bill Webb, chief investment officer at Gluskin Sheff. Noting that many stocks have recently sold off after reporting earnings above analysts' estimates, he added, "it is clear a lot of good economic news and corporate news is already baked in to the market."
Webb expects a "fairly sharp" correction, and noted that Gluskin Sheff now believes the stock market is between 20% and 30% overvalued.
Investors face a clutch of key political and economic events this week, including a Fed interest rate decision and Obama's State of the Union address on Wednesday.
Among companies releasing earnings on Monday, oilfield-services provider Halliburton (HAL 30.45, -0.70, -2.25%) reported fourth-quarter earnings of 27 cents a share, in line with analysts' expectations. Its fourth-quarter profit fell 48%, as international activity declined. Halliburton was down 3.6% recently. Later on Monday, Apple (AAPL 202.53, +4.78, +2.42%) will release its earnings after the market closes.
In other markets, the price of oil edged down, while gold futures rose. The dollar strengthened against the yen, but weakened against the euro. Treasurys crept down, with the 10-year note (UST10Y 3.61, +0.01, +0.22%) off 3/16 to yield 3.625%.
