Stocks get knocked back

NEW YORK (CNNMoney.com) -- Stocks slumped Wednesday as a strong dollar and questions about China's lending practices slammed commodities, one of the leaders of the recent rally.

IBM dragged on the tech sector as investors picked apart the company's outlook one day after sending the stock higher.

The Dow Jones industrial average (INDU) fell 122 points, or 1.1%, according to early tallies, after having fallen as much as 207 points in the morning. The S&P 500 index (SPX) lost 12 points, or 1%. The Nasdaq composite (COMP) gave back 29 points, or 1.3%.

A stronger dollar pressured dollar-traded commodity prices and stocks. The sector was also hit by reports that China intends to slow the pace of lending this year in an attempt to get ahead of inflation.

"China's efforts to get their banks to lend less really hit commodities hard, because China is the marginal buyer of commodities," said David Chalupnik, head of equities at First American Funds.

Commodities were also under pressure in reaction to the dollar, which firmed up in comparison to a weak euro and in response to the surprise Republican Senatorial victory in Massachusetts. (For more details, click here.)

Commodities and commodity stocks were among the big leaders of the rally over the last year and the weakness in the sector dragged on the broader market Wednesday.

IBM and the techs led stocks higher Tuesday and IBM and the techs were among the biggest drags Wednesday, as investors backtracked one day after the Dow, S&P 500 and Nasdaq ended at the highest levels since Sept. 2008.

With IBM, the earnings and profit margins were good, but the revenues were mostly in line with forecasts and the outlook was good not great, relative to high expectations, Chalupnik said.

"Expectations are higher after two quarters of cost-cutting fueled earnings growth, but little revenue growth," Chalupnik said. "I think the market now needs to see the revenues come in strong. Just meeting is not enough."

Declines were broad based, with 26 of 30 Dow components falling, led by IBM, Hewlett-Packard (HPQ, Fortune 500), Chevron (CVX, Fortune 500), Exxon Mobil (XOM, Fortune 500), Boeing (BA, Fortune 500), United Technologies (UTX, Fortune 500) and Wal-Mart Stores (WMT, Fortune 500).

IBM: The tech leader reported higher quarterly sales and earnings late Tuesday that topped estimates. But investors took a "sell the news" approach and sent shares 3% lower Wednesday.

IBM said it earned $3.59 per share versus $3.28 a year earlier. Analysts surveyed by Thomson Reuters thought it would earn $3.47 per share. Sales inched up to $27.23 billion from $27 billion in the prior year versus forecasts for a drop to $26.96 billion.

Looking forward, IBM said it expects earnings per share of at least $11 for 2010.

Banking results: Dow component Bank of America (BAC, Fortune 500) said losses widened to $5.2 billion in the fourth quarter of last year, partly due to the bank paying back government bailout funds. BofA said the repayments shaved $4 billion off its bottom line.

The company was expected to post a loss of $3.9 billion, according to forecasts. On a per-share basis, BofA lost 60 cents versus forecasts for a loss of 52 cents. Shares were barely changed.

Morgan Stanley (MS, Fortune 500) reported its second-straight quarterly profit, one year after posting a massive loss. The financial firm said it earned $617 million for the quarter versus a loss of $11 billion a year ago. The stock fell around 1%.

Wells Fargo (WFC, Fortune 500) reported a surprise profit of $2.82 billion, or 8 cents a share, versus forecasts for a small loss. The bank benefited from stronger fee income, even as it repaid $25 billion in bailout money.

Health care: Investors were also assessing the surprise Republican election to the Massachusetts Senate seat previously held by the late Ted Kennedy.

The upset victor could kill health care reform by ending the Democrats' filibuster-proof majority in the Senate. Additionally, House Democrats are mostly opposed to the idea of passing the Senate health care bill.

Investors may also be betting that the change in the balance of power in the Senate will mean other Congressional spending programs could be cut back or set aside, which had an impact on the dollar.

Economy: Building permits, a measure of builder confidence, rose to a 653,000 unit annual rate in December from a 589,000 rate in November, the government reported. Permits were expected to rise to a 590,000 rate, according to a consensus of economists surveyed by Briefing.com.

But housing starts fell to a 557,000 unit annual rate from a 580,000 unit rate in November. Economists thought starts would fall to a 572,000 unit rate.

The Producer Price Index (PPI), a measure of wholesale inflation, rose 0.2% in December after climbing 1.8% in the previous month. Economists thought it would hold steady. The so-called core PPI, which strips out volatile food and energy prices, was flat versus forecasts for a gain of 0.1%. Core PPI rose 0.5% in the prior month.

World markets: Asian markets ended lower, with China losing 3% on the debt issue. European markets fell in late trading.

Commodities and the dollar: The dollar gained versus the euro and the yen.

COMEX gold for February delivery fell $27.40 to settle at $1,112.60 an ounce. Gold closed at an all-time high of $1,218.30 an ounce last month.

U.S. light crude oil for February delivery fell $1.87 to settle at $77.62 a barrel on the New York Mercantile Exchange.

Bonds: Treasury prices rose in a classic flight-to-quality, lowering the yield on the 10-year note to 3.65% from 3.69% late Tuesday. Treasury prices and yields move in opposite directions.

Market breadth was negative. On the New York Stock Exchange, losers topped winners by almost three to one on volume of 850 million shares. On the Nasdaq, decliners beat advancers by nearly three to one on volume of 2.03 billion shares. 

Wall Street recharges the rally

Citigroup's quarterly loss, a stronger dollar and Kraft's buyout of Cadbury were also in the mix.

The Dow Jones industrial average (INDU) gained 115 points, or 1.1%. The S&P 500 index (SPX) added 14 points, or 1.3%. The Nasdaq composite (COMP) rose 32 points, or 1.4%. The Dow and the S&P 500 ended at fresh 15-month highs and the Nasdaq ended at a new 16-month high.

After the close, IBM (IBM, Fortune 500) reported higher quarterly sales and earnings that topped estimates. But investors took a 'sell the news' approach and sent shares 1% lower in extended-hours trading.

IBM said it earned $3.59 per share versus $3.28 a year ago. Analysts surveyed by Thomson Reuters thought IBM would earn $3.47 per share. Sales rose modestly to $27.23 billion from $27 billion a year ago. Analysts thought sales would dip to $26.96 billion.

Looking forward, IBM said it expects earnings per share of at least $11 for 2010.

Stocks opened weaker following Citigroup's results, but soon turned higher as investors found reason to jump back into the market after Monday's holiday.

Gains were broad based, with 26 of 30 Dow components rising, led by Caterpillar (CAT, Fortune 500), IBM (IBM, Fortune 500), Johnson & Johnson (JNJ, Fortune 500), McDonald's (MCD, Fortune 500), 3M (MMM, Fortune 500), Merck (MRK, Fortune 500), 3M (MMM, Fortune 500) and Procter & Gamble (PG, Fortune 500).

Health care stocks jumped on bets that a Republican election to the Massachusetts U.S. Senate seat previously held by the late Ted Kennedy could stall or kill health care reform by ending the Democrats' filibuster-proof status. Polls were due to close at 8 p.m. ET.

All financial markets were closed Monday for the Martin Luther King holiday. Markets on Friday ended lower despite better-than-expected profit reports from JPMorgan Chase and Intel.

After a robust 2009, stocks were expected to drift at the beginning of the new year. But the momentum has remained positive and year-to-date, the S&P 500 is up 3%.

"The first half of 2010 is probably going to be an extension of the latter part of 2009," said Tommy Williams, president at Williams Financial Advisors. "Earnings are going to show strength versus a year ago, retail sales are picking up and unemployment will start to show some improvement."

However, he said that the second half of the year is likely to be trickier. "In the second half, there appear to be headwinds that could slow things down," Williams said. "But in the short term, I am optimistic."

Quarterly results: Financial firm Citigroup (C, Fortune 500) reported a $7.6 billion quarterly loss, partly due to the bank paying back the government $20 billion in bailout funds. On a per-share basis, Citigroup lost 33 cents, in line with forecasts, after reporting a loss of $2.44 a share in the prior year's quarter.

On the upside, the company said consumer credit losses dropped in the quarter, and that it also set aside less money for bad loans during the quarter.

Some 57 of the companies in the S&P 500 are due to report results this week, with the focus on banks. Wells Fargo (WFC, Fortune 500), Bank of America (BAC, Fortune 500), Morgan Stanley (MS, Fortune 500), American Express (AXP, Fortune 500) and a number of regional banks are all due.

S&P 500 earnings are expected to have risen 186% versus a year ago and revenue is expected to have risen 7% according to the latest forecast from earnings tracker Thomson Reuters.

But the jump is largely attributable to a spike in financial sector results versus an abysmal fourth quarter of 2008 amid the height of the financial crisis. Without the financial sector, earnings growth slips to 8% and revenue growth falls to 1%.

Kraft buys Cadbury: The British candy company agreed to a larger $19.5 billion takeover offer from U.S. food maker Kraft Foods (KFT, Fortune 500) in a deal that puts an end to a four-month fight. The board on Tuesday recommended shareholders take Kraft's cash-and-stock offer in a move that will create the world's biggest chocolate maker.

Shares of Kraft, a Dow component, fell 0.6%, cutting earlier losses. American-traded shares of Cadbury (CBY) rose 6%.

World markets: Asian markets ended mixed, with Japan's Nikkei lower and Hong Kong's Hang Seng higher. European markets ended higher, reversing earlier losses.

Commodities and the dollar: The dollar gained versus the euro and the yen.

COMEX gold for February delivery rose $9.50 to settle at $1,140 an ounce. Gold closed at an all-time high of $1,218.30 an ounce last month.

U.S. light crude oil for February delivery rose $1.02 to settle at $79.02 a barrel on the New York Mercantile Exchange.

Bonds: Treasury prices fell, raising the yield on the 10-year note to 3.69% from 3.67% late Friday. Treasury markets were closed Monday. Treasury prices and yields move in opposite directions.

Market breadth was positive. On the New York Stock Exchange, winners beat losers by over three to one on volume of 1.036 billion shares. On the Nasdaq, advancers topped decliners by over two to one on volume of 2.08 billion shares. 

Profits and losses and banks. Oh my!

NEW YORK (CNNMoney.com) -- Better-than-expected results from big names JPMorgan Chase and Intel failed to inspire investors last week. Can this week's crop of marquee name companies recharge the rally's engine?

57 companies in the S&P 500 report quarterly results this week, highlighted by the financial sector. Bank of America (BAC, Fortune 500), American Express (AXP, Fortune 500), Goldman Sachs (GS, Fortune 500), Morgan Stanley (MS, Fortune 500), Wells Fargo (WFC, Fortune 500) and a bunch of regional banks are all up at bat this week.

Overall S&P 500 earnings in the fourth quarter are expected to have spiked 186% from a year ago and revenue is expected to have risen 7%. But strip out the impact of the financial sector and earnings growth drops down to 8% and revenue growth falls to 1%.

"The financial sector will benefit from very easy comparisons to last year, but the real question is how the earnings and revenues look outside of financials and what companies say about later in 2010," said John Butters, senior research analyst at earnings tracker Thomson Reuters.

Right now analysts expect first-quarter 2010 earnings to have risen 30% versus the first quarter of 2009, another brutal quarter in which the financial crisis hit a nadir and the Dow and S&P 500 cratered at 12-year lows and the Nasdaq at a six-year low. Second quarter earnings are expected to have risen 23% versus a less hard-hit second quarter of 2009.

"What's interesting is that the easy comparisons start to phase out in the second quarter, but analysts are still expecting a pick up in earnings."

Banks: The financial sector as a whole is expected to see phenomenal year-over-year growth, due to easy comparisons to an abysmal fourth quarter of 2008, when the group lost $81 billion. Last year was so bad that Thomson Reuters can't even predict the year-over-year change for the sector. Currently, analysts expect the group to have earned $2.9 billion.

That many of the companies that helped exacerbate the financial crisis a year ago are now performing nicely is the source of great consternation to many investors and lawmakers. That won't change in the week ahead.

Goldman Sachs, which reports results Thursday morning, is expected to have earned $5.19 per share after reporting a loss of $4.97 per share a year ago. Morgan Stanley, due to report Wednesday morning is expected to report a profit of 36 cents per share after reporting a loss of $2.34 last year. (For other forecasts, see the chart).

Other winners and losers: After financials, the next big gainer is expected to be the basic materials sector, which includes chemicals and gold and silver miners.

The sector's profits are expected to have risen 162% from a year ago. However, the sector is smaller and less influential than the financial names.

The third best performer is expected to be consumer discretionary, forecast to see a spike of 118% year over year, largely due to Ford Motor (F, Fortune 500).

On the downside, energy stocks are expected to have fallen 25% from a year ago, followed by the industrial sector, set to lose 13%.

Monday: All financial markets are closed for Martin Luther King Jr. Day.

Tuesday: There is no market-moving economic news due out Tuesday.

Wednesday: The December reading on housing starts and building permits is due out in the morning.

Home builders are expected to have initiated construction at a 580,000 unit annual rate versus a 574,000 unit annual rate in November, according to a consensus of economists surveyed by Briefing.com.

Building permits, a measure of builder confidence, likely inched up to a 585,000 unit annual rate from a 584,00 unit rate in November.

The Producer Price Index, a measure of wholesale inflation, is expected to have held steady in December after rising 0.1% the previous month. The so-called core PPI, which strips out volatile food and energy prices, is expected to have risen 0.2% after rising 0.5% in November.

Thursday: Reports are due on weekly jobless claims, the December index of leading economic indicators and the Philadelphia Fed index, a regional manufacturing survey. However, no analysts' estimates were available at the time of the writing of the story.

Friday: The House Financial Services Committee is holding a hearing on compensation practices. 

Intel's profit beats Wall Street expectations

NEW YORK (CNNMoney.com) -- Intel Corp. posted a fourth-quarter profit that trounced Wall Street expectations Thursday, as the world's largest microchip maker became the first major technology company to report results for the period.

The Santa Clara, Calif.-based company reported a profit of $2.3 billion, or 40 cents per share, during the final quarter of 2009. The income was nearly 10 times higher than the $234 million, or 4 cents per share, that Intel reported for the fourth quarter of 2008.

Analysts polled by Thomson Reuters forecasted earnings of 30 cents per share.

"Our ability to weather this business cycle demonstrates that microprocessors are indispensable in our modern world," said Intel president and chief executive Paul Otellini, in a statement.

Intel' (INTC, Fortune 500)s quarterly sales rose to $10.6 billion, 28% higher than the $8.2 billion in the same period of 2008. The revenue also topped analysts' forecast of $10.2 billion.

Revenue in the PC client group rose 10% in the quarter, in line with analysts' predictions. But an upside analysts weren't expecting came from a 21% jump in sales in the data center group, which includes processors for servers.

For the full year, Intel posted a profit of $4.4 billion, or 77 cents per share, on revenue of $35.1 billion. That compared to earnings of $5.3 billion, or 92 cents per share, on revenue of $37.6 billion in 2008.

"In 2009, Intel had the best low-cost solutions with its Atom chip, which carried them through the year," said Kevin Cassidy, analyst at Thomas Weisel Partners.

But the encouraging news to Cassidy was in Intel's guidance going forward.

"Intel is feeling confident about corporate IT (information technology) spending coming back, and they have the best high-end server solutions," he said. "As corporations upgrade their data centers this year, Intel will benefit. Their timing has been perfect."

For the current quarter, Intel expects revenue between $9.3 billion and $10.1 billion. Analysts have forecast it to range between $9 billion and $10 billion.

Despite the upbeat report, the company still faces a legal battle this year. After Intel and rival chipmaker Advanced Micro Devices agreed on a $1.25 billion settlement on their legal feuds over antitrust violations and patent disputes, the Federal Trade Commission filed a lawsuit against Intel in December for alleged anticompetitive practices.

Shares of Intel rose nearly 2% in after-hours trading. 

Stocks manage gains in choppy session

Dow at new 15-month high

NEW YORK (CNNMoney.com) -- Stocks rallied Wednesday as investors resumed the advance after a one-day selloff, scooping up tech and financial shares despite Google's potential shutdown of its China operations and testimony from major bank executives.

The Dow Jones industrial average (INDU) rose 53 points, or 0.5%, according to early tallies, closing at the highest point since Oct. 1, 2008. The S&P 500 index (SPX) rose 9 points, or 0.8%. The Nasdaq composite (COMP) gained 26 points, or 1.1%.

Stocks fell Tuesday after Alcoa's weaker-than-expected profit report and Chevron's warning raised worries about the strength of the fourth-quarter reports.

After that selloff, stocks managed slim gains Wednesday, but were hindered by a selloff in the commodities market and in stocks such as Exxon Mobil (XOM, Fortune 500) and Chevron (CVX, Fortune 500).

After 2009's huge recovery from the brutal selloff of the financial crisis, gains are going to be harder to come by this year, said Rob Siewert, portfolio manager at Glenmede.

"What we are looking for in 2010 is the handoff of a rally that was initially driven by liquidity to a slower advance on the back of fundamentals," he said. "Fundamentals will have to take over."

He said that while the momentum is still alive, it's going to take some positive profit reports to provide that fundamental component.

"Alcoa has disappointed of late and I'm not sure that they should be used as the tell for how earnings season will progress," he said. "I think we'll see another quarter of earnings beating estimates, if only because the comparisons to a year ago are easy."

One year ago, in the thick of the financial crisis, S&P 500 companies posted the worst results in the history of earnings tracker Thomson Reuters, with profits dropping 67% from the previous year.

This quarter, earnings are expected to have risen over 200%, largely due to a snap back in the bank sector.

Banks: Financial shares rallied even as CEOs of the largest financial institutions testified on Capitol Hill about mistakes made in the lead-up to the financial crisis.

Goldman Sachs' Lloyd Blankfein, Bank of America's Brian Moynihan, Morgan Stanley's John Mack and JPMorgan Chase's Jamie Dimon were among those testifying before the bipartisan Financial Crisis Inquiry Commission.

The executives agreed that the banks took on too much risk and that mistakes were made, including underestimating the depth of a housing market implosion. But they also denied being aware at the time that a financial crisis of such magnitude could develop.

The fact that many of the banks that helped fuel the financial crisis are now profiting soundly a year later is a major source of frustration to consumers, especially since taxpayers helped fund their bailouts.

The White House is debating taxing companies that took bailout funds to make sure they pay the money back. President Obama is expected to announce the plan Thursday.

At the same time, the FDIC, the top banking regulator, is considering requiring lenders to pay if they tie compensation to risky practices.

Google and China: Google (GOOG, Fortune 500) shares dipped 1% after the Internet behemoth threatened to pull out of China due to cyber attacks and attempts to access the Gmail accounts of human rights activists. The company said it is one of at least 20 companies that has been attacked.

Google's presence in China is minimal so far. But the Chinese market is considered to be one of the fastest-growing and most lucrative technology markets in the world, begging the question of whether Google will really walk away.

Microsoft (MSFT, Fortune 500), Cisco Systems (CSCO, Fortune 500) and other companies are also trying to establish a big presence in the market.

On Tuesday, Yahoo (YHOO, Fortune 500) said it is "aligned with Google" in condemning the kinds of cyber attacks the company had experienced from China, but did not say if it had experienced a similar attack.

On the move: Merck (MRK, Fortune 500) shares rallied over 4% after brokerage Credit Suisse upgraded it to "outperform" from "neutral" and lifted its 12-month price target on the drugmaker, according to reports.

Market breadth was positive. On the New York Stock Exchange, winners beat losers by over two to one on volume of 680 million shares. On the Nasdaq, advancers topped decliners by over two to one on volume of 1.84 billion shares.

Economy: In the afternoon, the Federal Reserve released its periodic "beige book" report on the economy. The report showed that economic conditions generally improved in the Fed's 12 districts, but that credit conditions deteriorated.

The December Treasury budget showed a deficit of $91.9 billion, versus $120.3 billion in November, roughly in line with forecasts for a deficit of $92 billion.

World markets: Asian markets ended mixed one day after hitting 17-month highs on a report that showed China's exports jumped 17.7% in December versus a year ago. European markets ended lower.

Commodities and the dollar: The dollar fell versus the euro and gained against the yen.

COMEX gold for February delivery rose $7.80 to $1,137.20 an ounce. Gold closed at an all-time high of $1,218.30 an ounce last month.

U.S. light crude oil for February delivery fell $1.06 to $79.73 a barrel on the New York Mercantile Exchange.

Bonds: Treasury prices slumped after a $21 billion offering of 10-year notes saw strong demand. The slide raised the yield on the 10-year note to 3.78% from 3.71% late Tuesday. Treasury prices and yields move in opposite directions.

NEW YORK (CNNMoney.com) -- U.S. stocks were set for a flat open Wednesday, as investors prepared to tiptoe back into the market after the previous session's losses.

The Dow Jones industrial average, Nasdaq-100 and S&P-500 futures were close to the breakeven point.

Futures measure current index values against their perceived future performance and offer an indication of how markets may open when trading begins.

U.S. stocks fell on Tuesday, as worries about the strength of fourth-quarter earnings weighed on sentiment.

"We have financial markets that have been roiling and bubbling, but we have the real fundamentals coming to light this quarter that are showing a different story," said Derek Hoffman, chief executive and founder of Wall St. Cheat Sheet in North Carolina.

He said that recent events in China -- where the government could be raising interest rates "sooner than expected" and where Google might be pulling out -- have also rattled investors.

"If Google's engines aren't roiling forward, the markets aren't moving forward, as well," said Hoffman.

The markets are also haunted by the specter of fees that may be imposed on the country's biggest financial institutions, as the government attempts to recoup losses from the Troubled Asset Relief Program. President Obama is expected to announce more on this plan Thursday.

Economy: Investors will look to the Federal Reserve's Beige Book on economic conditions, which comes out at 2 p.m. ET. The Treasury budget is also due out at that time.

Banks: A commission appointed by Congress to investigate the financial crisis will question the chief executives of Goldman Sachs (GS, Fortune 500), Morgan Stanley (MS, Fortune 500), J.P. Morgan Chase (JPM, Fortune 500) and Bank of America (BAC, Fortune 500) on Wednesday. Panel chairman Philip Angelides said he wants to learn how banks were considered "too big to fail" leading up to the 2008 financial collapse.

Companies: Stocks to watch include Google (GOOG, Fortune 500). On Tuesday the search giant threatened to shut down its China operations, citing censorship rules and cyber attacks. Google said that it was one of at least 20 companies that had been victimized by a "highly sophisticated and targeted attack" originating in China in December to gain access of e-mail accounts of human rights activists.

World markets: Asian stocks tumbled, with Japan's Nikkei shedding about 1.3%. Major European indexes were mixed in midday trading.

Money and oil: The dollar fell against most of the major international currencies, except for the yen.

The price of oil slipped 74 cents a barrel to $80.05.

The price of gold rose $6.80 an ounce to $1,136.20.

As for Treasurys, the price of the 10-year note fell, raising the yield to 3.74%. 

Stocks sink on earnings woes

Stocks seesaw ahead of results

Stocks rally into earnings season

Dow components Alcoa, Intel and JPMorgan Chase all report quarterly results next week. On the economic front, reports are due on retail sales, the trade gap, consumer sentiment and manufacturing.

Late last week the government reported employers cut 85,000 jobs from their payrolls, surprising economists who were forecasting no change. Meanwhile the unemployment rate held steady at 10%, near 26-year highs.

But the stock market showed little reaction, managing to end the first trading week of 2010 in positive territory. The Dow industrials and S&P 500 now stand at 15 month highs and the Nasdaq composite is at a 16-month high.

Whether the market can sustain and build on last year's gains will depend on employment, corporate profits and whether the consumer can pick up the slack when the government stimulus runs out, said Brett Hammond, chief investment strategist at TIAA-CREF.

"Most companies have cut costs but they haven't grown revenue yet," Hammond said. "The question is whether corporate profits can rise in a time when American consumers can't step up to the plate."

Eye on earnings: S&P 500 earnings are expected to have jumped 213% in the fourth quarter of 2009, thanks to easy comparisons to an abysmal fourth quarter of 2008, the worst quarter in the history of earnings tracker Thomson Reuters. In that quarter, profits plunged 67% as the crisis in the financial and auto sectors hit a nadir, credit remained frozen and the recession intensified.

But a gain of 213% needs to be taken with a gallon of salt, because it mostly reflects the about face in the financial sector. The sector saw a quarterly loss in the fourth quarter of 2008 that was unprecedented -- so substantial that Thomson isn't fully sure it will be able to measure how much of a jump the sector posted year-over-year in the fourth quarter of 2009.

On Monday after the close, Alcoa (AA, Fortune 500) kicks off the quarterly reporting period, as it traditionally does. The aluminum producer is expected to have earned a profit of 6 cents per share versus a loss of 28 cents a year ago, according to Thomson Reuters forecasts. Alcoa is also expected to report a 15% drop in revenue.

On Thursday after the close, Intel (INTC, Fortune 500) is expected to report a quarterly profit of 30 cents per share versus 4 cents a year ago. The chipmaker is also expected to report a 23% rise in quarterly revenue.

On Friday morning, before the start of trading, JPMorgan Chase (JPM, Fortune 500) is expected to report a profit of 63 cents per share versus 7 cents a year ago. The bank is also expected to report a 57% rise in revenue.

The fact that many of the big banks that helped bring the economy to the brink of disaster are now profiting nicely one year later is a major source of anger and frustration for many investors, particularly since taxpayers helped fund their bailouts.

Next week marks a step toward addressing those concerns and investigating further why the crisis happened, when the Financial Crisis Inquiry Commission holds its first public hearings on Wednesday and Thursday in Washington.

The bipartisan commission will hear testimony from some of the nation's top bank executives including Goldman Sachs' Lloyd Blankfein, Bank of America's Brian Moynihan, Morgan Stanley's John Mack and JPMorgan Chase's Jamie Dimon.

Monday: Federal Reserve Governor Dennis P. Lockhart is speaking in the afternoon.

Tuesday: The November trade balance, from the Commerce Department, is due out before the market opens. The trade gap is expected to have widened to $34.8 billion from $32.9 billion.

Wednesday: The December Treasury budget, due out in the afternoon, is expected to have narrowed to $70.4 billion from $120.3 billion.

Federal Reserve Governor Charles L. Evans is speaking in the afternoon.

The government's weekly crude oil inventories report is also due in the morning. The Fed's "beige book" semi-annual reading on the economy is due in the afternoon.

Thursday: The December retail sales report from the Commerce Department is due in the morning. Sales are expected to have risen 0.4% after rising 1.3% in the previous month. Sales excluding autos are expected to have risen 0.3% after rising 1.2% in November.

November business inventories, due after the start of trading, are expected to hold steady after rising 0.2% in the previous month.

The National Retail Federation issues its holiday sales report, a key measure of chain store sales during the critical November and December period.

Weekly initial jobless claims and December import and export prices are also on tap.

Friday: The Consumer Price Index (CPI) in December is expected to have risen 0.2% after rising 0.4% in November. The so-called Core CPI is expected to have risen 0.1% versus an unchanged reading in the previous month.

The Federal Reserve reports on manufacturing activity in the morning. Industrial production is expected to have risen 0.6% in December after rising 0.8% in November. Capacity utilization isxpected to have risen to 71.8% in December from 71.3% in the previous month.

The University of Michigan's consumer sentiment index for January is expected to have risen to 73.8 in early January from 72.5 in late December.

The Empire Manufacturing survey, a regional manufacturing reading, is also due in the morning.

Federal Reserve Governor Jeffrey M. Lacker speaks Friday afternoon.

Blue chips gain ahead of jobs report

NEW YORK (CNNMoney.com) -- A rally in financial shares and signs of improvement in the retail sector gave the blue chips a boost Thursday, but the broader market dragged on jitters ahead of Friday's big government jobs report.

The Dow Jones industrial average (INDU) added 33 points, or 0.3%, according to early tallies. Boeing (BA, Fortune 500), General Electric (GE, Fortune 500) and the bank stocks led the advance.

The S&P 500 index (SPX) added nearly 5 points, or 0.4%. The Nasdaq composite (COMP) ended just below unchanged.

Bank of America (BAC, Fortune 500), JPMorgan Chase (JPM, Fortune 500), Goldman Sachs (GS, Fortune 500) and Wells Fargo (WFC, Fortune 500) were among the big financial names making strides. The KBW Bank (BKX) index jumped more than 4%.

Select homebuilders and retailers rose too. But the tech sector was under pressure, dragging on the Nasdaq.

Stocks struggled Wednesday as weakness in tech and telecom vied with signs of stabilization in the job market and service sector of the economy. The labor market was again in focus Thursday as investors eyed the weekly jobless claims and geared up for Friday's big government jobs report.

Since rallying Monday, stocks have been mixed to lower. Market participants remain cautious ahead of the next batch of earnings and economic news as well as holding back in the wake of a big 2009. Last year, the S&P 500 gained 23%, the Dow industrials added 19% and the Nasdaq added 44%.

Analysts expect 2010 to continue the uptrend, but at a much milder pace.

"Right now things are shaping up to be pretty decent for 2010," said Dave Hinnenkamp, CEO at KDV Wealth Management. "Unemployment is going to be stubborn, but we'll see good earnings growth, especially in the first half and that will help stocks."

Investors are looking for signs that the economic recovery that began in the fourth quarter is sustainable, with unemployment and consumer spending front-and-center.

Jobs: The number of Americans filing new claims for unemployment rose to 434,000 last week from 433,000 the previous week, the Labor Department reported Thursday. Economists surveyed by Briefing.com thought it would rise to 439,000, on average.

Continuing claims, a measure of Americans who have been receiving benefits for a week or more, fell to 4,802,000 from 4,981,000 the previous week. Economists thought it would ease to 4,975,000.

On Friday, the government is expected to report that employers cut 35,000 from their payrolls after cutting 11,000 in the previous month. The unemployment rate, generated by a separate survey, is expected to hold steady at 10%.

Retail: Late-season holiday shoppers were a boon to the nation's chain stores, boosting December sales by 2.9%, a year after sales slumped 3.6% at the height of the recession.

Discounters such as Costco (COST, Fortune 500) fared particularly well. The company said sales at stores open a year or more, a retail metric known as same-store sales, rose 9% in December versus forecasts for a rise of 7.9%.

Target (TGT, Fortune 500) said sales rose 1.8%, versus forecasts for a rise of 0.2%. The company also said fourth-quarter earnings should meet or top analysts' forecasts of $1.11 per share.

World markets: Asian markets ended higher. In Europe, London's FTSE 100 rose 0.1%, France's CAC 40 was little changed and the German DAX lost 0.4%.

Commodities and the dollar: The dollar gained versus the euro and the yen.

The stronger dollar pressured dollar-traded commodities. COMEX gold for February delivery lost $2.80 to settle at $1,133.70 an ounce. Gold closed at an all-time high of $1,218.30 an ounce last month.

U.S. light crude oil for February delivery fell 52 cents to settle at $82.66 a barrel on the New York Mercantile Exchange, after ending the previous session at $83.18, the highest close since October 2008.

Bonds: Treasury prices fell, raising the yield on the 10-year note to 3.81% from 3.80% late Wednesday. Treasury prices and yields move in opposite directions.

Market breadth was positive. On the New York Stock Exchange, winners beat losers by three to two on volume of 940 million shares. On the Nasdaq, advancers topped decliners five to four on volume of 1.94 billion shares.

Stocks set for a lower start

NEW YORK (CNNMoney.com) -- U.S. stocks were set to open lower Thursday as a better-than-expected jobless claims report did little to dissuade investor caution.

Dow Jones industrial average, Nasdaq-100 and S&P-500 futures were lower, backing off earlier troughs just slightly following the jobless report. Futures measure current index values against their perceived future performance and offer an indication of how markets may open when trading begins.

Stocks ended little changed Wednesday as investors mulled weakness in tech and telecoms along with signs of stabilization in the job market and in the services sector.

Peter Cardillo, chief market economist for Avalon Partners, said the slump in pre-market trading was a reaction to the stronger dollar, which was a reaction to the "surprise move" by the Chinese in raising interest rates.

He said that traders are exercising caution ahead of the monthly payroll number on Friday.

Economy: Before Thursday's open, the government released its weekly report on jobless claims, which was slightly better than expected.

The Labor Department reported that the number of first-time filers for unemployment insurance totaled 434,000 in the week ended Jan. 2, an increase of 1,000 compared to revised figures from the prior week.

The number of initial jobless claims was expected to rise to 439,000, according to a consensus estimate of analysts polled by Briefing.com.

The report comes a day before the government's monthly reading of employment. The economists' forecast is for a decline of 35,000 jobs in December, with the unemployment rate holding at 10%.

Companies: Costco Wholesale (COST, Fortune 500) reported December sales at stores open a year or more rose 9% from the prior year, including gasoline sales and currency fluctuations. Other retailers were to report their holiday-season results before the open.

World markets: Stocks in Asia closed lower, with Tokyo's Nikkei down 0.5%. European indexes slipped in midday trading.

Money and oil: The dollar gained against the euro, pound and yen.

Crude oil for February delivery eased 65 cents to $82.53 a barrel, after hitting a new 14-month high on Wednesday, driven by colder temperatures and a weaker dollar.

Gold for February delivery eased $7.10 to $1,129.40 an ounce.

As for bonds, the price of the 10-year note rose, raising the yield to 3.84%.

STI higher at midday

Stocks struggle after rally

NEW YORK (CNNMoney.com) -- Stocks ended a choppy session little changed Tuesday as investors weighed a seesawing dollar, a slew of auto sales and reports on pending home sales and factory orders.

The Dow Jones industrial average (INDU) lost 12 points, or 0.1%. The S&P 500 index (SPX) added 3 points, or 0.3%. The Nasdaq composite (COMP) was barely changed.

A late-session advance in the influential banking sector helped the market find its footing late in the session, with the KBW Bank (BKX) index adding 2.2%, thanks to strength in components such as JPMorgan Chase (JPM, Fortune 500) and Capital One Financial (COF, Fortune 500).

Investors are also being cautious after a tumultuous but strong year on Wall Street, in which the broad S&P 500 managed to gain over 23% despite touching a more than 12-year low in March. Between that March 9 low point and year end, the S&P 500 gained 65%.

"After the first-quarter selloff (last year), the market was undervalued, but at this point it's fairly valued, and that makes it a lot more challenging for investors," said Alan Lancz, president at Alan B. Lancz & Associates.

He said that the trend in 2010 will likely remain up, but that the gainers will be a more selective bunch than last year, when most areas of the market advanced. Lancz believes that high-dividend paying companies that do a lot of business globally are likely to stand out.

In general, "there is still a lot of money on the sidelines, and earnings in the first half of the year should benefit from easy comparisons to a year ago, all of which bodes well for stocks," he said.

Housing sees setback: Homebuyers signed 16% fewer sales contracts in November than in December, according to a National Association of Realtors report released in the morning.

Economists surveyed by Briefing.com expected the report to show that pending home sales fell 2% in November after rising for 9 straight months. Still, sales were up 15.5% from November 2008.

The November setback reflected the near-expiration of the government's first-time homebuyers tax credit. Buyers jumped in when the credit was expected to expire on Nov. 30. But once it was announced that it was being extended through June, the buying frenzy lost momentum.

Economy: Another report showed that factory orders increased by 1.1% in November after climbing 0.8% in October. Economists thought orders would grow by 0.5%.

A third report showed that severe unemployment worsened in big cities in November. The government reported that 17 of 372 metropolitan areas surveyed had unemployment rates of at least 15% in November up from 15 areas in October.

Kraft Foods: The Dow component has sweetened its $16.4 billion hostile takeover offer for British chocolate maker Cadbury, providing a partial cash-alternative to its already announced deal.

The funding would come from Kraft (KFT, Fortune 500)'s sale of its frozen pizza business to Swiss food company Nestle for $3.7 billion in cash, a deal announced early Tuesday. Nestle has also said it won't bid for Cadbury.

But Berkshire Hathaway, the conglomerate run by influential investor Warren Buffett and Kraft's largest shareholder, said it is voting "no" on Kraft's request to issue as many as 370 million shares to help finance the bid for Cadbury. Berkshire said that allowing this would essentially be giving Kraft a blank check.

Kraft extended its deadline for the Cadbury offer to Feb. 2. Kraft shares rallied nearly 5%.

Technology: Google (GOOG, Fortune 500) released its Nexus One smartphone Tuesday, the first mobile device entirely designed by the company. Previously, Google had designed mobile software such as Google Maps and also released its Android operating system.

Also, Apple said Tuesday the number of iPhone applications downloaded from its App store has topped 3 billion. Late Monday, a Wall Street Journal report said that Apple will ship its much-anticipated tablet computer in March, following a January unveiling.

Auto and truck sales: Automakers reported improved December sales at the end of their worst year in decades.

Ford Motor (F, Fortune 500)'s U.S. sales jumped 34% in December versus a year ago and over 50% versus the previous month. But Ford's sales for the full year fell 15%.

Rival General Motors said sales fell 6% in December versus a year ago, but said that sales rose 38% from November. For the full year, GM said sales fell 30%.

Among other companies reporting, Chrysler said that sales in December fell 4% versus a year ago and up 36% from November. Chrysler also dropped 36% for the year and sold fewer than a million vehicles, its worst year since the early 1960s.

World markets: Asian markets ended higher. In Europe, London's FTSE 100 rose 0.4%, France's CAC 40 was little changed and the German DAX lost 0.3%.

Commodities and the dollar: The dollar gained versus the euro and fell against the yen.

COMEX gold for February delivery gained 40 cents to settle at $1,118.70 an ounce. Gold closed at an all-time high of $1,218.30 an ounce last month.

U.S. light crude oil for February delivery rose 26 cents to settle at $81.77 a barrel on the New York Mercantile Exchange, the highest close since October 2008.

Bonds: Treasury prices rose, lowering the yield on the 10-year note to 3.75% from 3.82% late Monday. Treasury prices and yields move in opposite directions.

Market breadth was mixed. On the New York Stock Exchange, winners beat losers by three to two on volume of 1.19 billion shares. On the Nasdaq, decliners topped advancers by five to four on volume of 2.33 billion shares. 

STI higher at midday

Stocks start off 2010 with a rally

NEW YORK (CNNMoney.com) -- Wall Street surged Monday, starting off the new year on a positive note, after a report showed manufacturing activity is picking up and the weak dollar propelled commodity prices and stocks.

The Dow Jones industrial average (INDU) rallied 156 points, or 1.5%, according to early tallies. The S&P 500 index (SPX) rose 18 points, or 1.6%. The Nasdaq composite (COMP) gained 39 points, or 1.7%. All three major gauges closed at 15-month highs.

"The fact that stocks are up so much today is an encouraging sign, but we need to see a few days of follow through," said Will Hepburn, chief investment officer at Hepburn Capital Management.

He said the first few trading sessions of a new year are typically positive and that he wants to see several more days of gains on strong trading volume before he's willing to say that the rally has recharged.

Stocks fell Thursday in a thinly traded session on the last day of 2009. All financial markets were closed Friday in observance of New Year's Day.

The last month of 2009 saw stocks churning in a narrow range, managing modest gains, but not really charging ahead like in earlier months.

The market lost some momentum in November and December, Hepburn said. That slowdown coincided with the dollar beginning to firm up and investors opting to close the books early after a difficult year.

A tumultuous 2009 ended with substantial gains. The S&P 500 gained 23.4%, the Dow industrials gained 18.8% and the Nasdaq composite gained 44%.

Stocks are up even more substantially since bottoming in March at the height of the financial market crisis. After closing at a 12-year low on March 9, the Dow gained 59% and the S&P 500 gained 65% through year end. After closing at a 6-year low on the same date, the Nasdaq gained 79%.

Economy: The Institute for Supply Management's manufacturing index rose to 55.9 in December from 53.6 in November, signifying a wider expansion in the sector. Economists surveyed by Briefing.com thought it would rise to 54.3. Stronger reports were also released in Asia, adding to bets that the global manufacturing sector is recovering.

A separate report from the U.S. government showed that construction spending fell 0.6% in November versus forecasts for a drop of 0.5%. Spending fell 0.5% in October.

On the move: Gains were broad based, with 27 of 30 Dow issues rallying, led by Chevron (CVX, Fortune 500), Exxon Mobil (XOM, Fortune 500), Boeing (BA, Fortune 500), United Technologies (UTX, Fortune 500), IBM (IBM, Fortune 500), Hewlett-Packard (HPQ, Fortune 500), JPMorgan Chase (JPM, Fortune 500) and Wal-Mart Stores (WMT, Fortune 500).

In other news, Swiss drugmaker Novartis AG plans to take control of Alcon (ACL) by paying $38.5 billion to buy the 77% of the eye care products maker it doesn't already own. The deal involved Novartis buying out Nestle SA's 52% stake in Alcon for $28 billion in cash and then merging with Alcon to access the remaining 23% held by minority shareholders.

Alcon shares fell nearly 6%.

Bernanke defends Fed policy: The Federal Reserve chairman said Sunday that the central bank's decision to keep interest rates very low between 2002 and 2006 was appropriate and not the cause of the housing market bubble.

He said regulation would have been a better way to avert the collapse that ensued when home prices crumbled, leading to massive foreclosures, billions in losses for banks and the worst financial crisis since the Great Depression.

The Senate is currently considering Bernanke's nomination by President Obama for another term as Fed chairman. The Senate Banking Committee already gave its approval last month. His current term ends on Jan. 31.

World markets: Asian markets gained, with the exception of the Hong Kong Hang Seng. In Europe, London's FTSE 100 rose 1.2%, France's CAC 40 added 1.8% and the German DAX rallied 1.3%.

Commodities and the dollar: The dollar tumbled versus other major currencies.

The weaker dollar gave a lift to dollar-traded commodities.

COMEX gold for February delivery settled up $22.10 to $1,118.30 an ounce. Gold closed at an all-time high of $1,218.30 an ounce earlier this month.

U.S. light crude oil for February delivery gained $2.15 to $81.51 a barrel on the New York Mercantile Exchange, the highest close since October 2008.

Bonds: Treasury prices rose, lowering the yield on the 10-year note to 3.81% from 3.84% late Thursday. Treasury prices and yields move in opposite directions.

Market breadth was positive. On the New York Stock Exchange, winners beat losers four to one on volume of 600 million shares. On the Nasdaq, advancers topped decliners three to one on volume of 1.32 billion shares.

Stocks set for initial '10 gain

NEW YORK (CNNMoney.com) -- Stocks were poised to start the new year with gains Monday as investors await two economic reports and consider weekend comments by Federal Reserve Chairman Ben Bernanke.

Dow Jones industrial average, Nasdaq-100 and S&P-500 futures were higher. Futures measure current index values against their perceived future performance and offer an indication of how markets may open when trading begins.

Stocks slumped Thursday in a thinly-traded session on the last day of 2009, but all three major indexes ended the year up. The markets were closed Friday in observance of New Year's Day.

In 2009, the S&P 500 gained 23.4%, the Dow industrials gained 18.8% and the Nasdaq added 44%.

Philip Isherwood, equities strategist at Evolution Strategies in London, said Wall Street is being propelled by strong manufacturing reports from China and South Korea, and the expectation that the United States will also report strong manufacturing activity.

"The big story is data flow, and within that is the ISM manufacturing, which is expected to pick up again," he said.

Also, Isherwood said the U.S. government is expected to release payroll numbers on Friday that "will carry on their benign trend."

Economy: After the market opens, a report is expected to show construction spending fell 0.5% in November after staying flat the previous month, according to a consensus of analysts polled by Briefing.com.

At 10 a.m. ET, the Institute for Supply Management's reading on manufacturing is predicted to have risen to 54 in December from 53.6 the previous month, and a separate report is expected to show factory orders rose 0.5% in November.

Bernanke: Federal Reserve chairman Bernanke said Sunday that low interest rates in the first half of the last decade were "appropriate" at the time and were not the main cause of the ensuing housing bubble.

Speaking at the American Economic Association conference in Atlanta, Bernanke also said regulation would have been a better way to end the housing bubble, calling monetary policy -- the raising and lower of interest rates -- "a blunt tool." (Bernanke defends Fed record)

World markets: Stocks in Asia closed mixed Monday, with Tokyo's Nikkei index up 1% and Hong Kong's Hang Seng index finishing 0.2% lower. European indexes were higher in midday trading.

Money, oil, gold and bonds: The dollar eased versus major international currencies, including the euro, the yen and the U.K. pound.

Crude oil for February delivery surged $1.48 to $80.84 a barrel.

Gold for February delivery rallied $21.30 to $1,117.50 an ounce.

The price rose on the 10-year note, while the yield slipped to 3.85%. 

Why the big phone companies are dogs

NEW YORK (CNNMoney.com) -- You'd think that 2009 would have been a great year for telecom stocks, right?

Think of all the hot gadgets: Apple's latest iPhone 3GS; Motorola's new Droid; the BlackBerry Storm 2; and several other touchscreen smartphones. But shares of the leading telecoms whose networks run these devices have missed out on the big stock-market rally.

Contrast that with Apple's stock more than doubling and Motorola enjoying a Lazarus-like comeback after a disastrous 2008.

This phenomenon isn't confined to the United States either: Shares of other leading telecom service providers around the globe have also stumbled.

The U.S. listed shares of Germany's Deutsche Telekom (DT), the parent company of T-Mobile, are down about 2%. Shares of France Telecom (FTE) are down 9%. China Mobile's (CHL) stock has fallen 11% while Japan's NTT DoCoMo (DCM) have plunged 28%.

Even one of the sector's better performers, Britain's Vodafone (VOD), has had a relatively modest stock price gain of 12.5%. (The S&P 500 is up 25% while the Nasdaq has surged nearly 45%.)

What gives? Even though many new phones are flying off the shelves and the carriers seem to be able to find a way to charge you fees for every conceivable data application imaginable, AT&T and Verizon are both expected to report a slide in earnings this year compared to 2008. Next year looks only slightly better.

Analysts are projecting just a 6% jump in earnings on a 1% increase in sales at AT&T, and a 2% rise in profits at Verizon and less than 1% increase in revenue. Unexciting growth prospects. Is there an app for that?

Simply put, growth in the cell phone units of AT&T and Verizon aren't enough to completely offset declines in other areas of their business.

Revenues from their "old" landline business already had been on the wane due to growth in wireless. The rough economy just made things worse as shrinking businesses had less of a need for phone service.

"Look at the fundamentals for Verizon and AT&T. Their corporate wireline businesses have been a drag. They have been under the strain of rising unemployment," said Steve Clement, an analyst with Pacific Crest Securities.

And even though wireless is now AT&T's biggest revenue generator, accounting for 40% of total sales, the old school phone business still has a big impact on the overall company. Voice revenue accounts for more than a quarter of Ma Bell's total sales.

The trend was similar at Verizon. Wireline revenues were down 5% in the third quarter while wireless sales were up 24%. But Verizon relies even more on its older businesses than AT&T. Wireline revenue accounted for more than 40% of total sales in the quarter.

Plus, the strong growth in Verizon's wireless revenue was largely a result of the acquisition of Alltel earlier this year. The third quarter 2008 results did not include Alltel. If they had, wireless sales growth would have been just 5%.

With all that in mind, it's no wonder that analysts are projecting anemic earnings growth for AT&T and Verizon during the next few years -- just 4% to 5%. Similar growth rates are expected for Deutsche Telekom, France Telecom and China Mobile.

The two U.S. phone giants have other problems too: In addition to competing against each other, they also face stiff pressure from cable companies and satellite companies like Comcast and DirecTV in other areas such as high-speed data and video services.

Clement said Verizon and AT&T may make "gradual inroads" in the video business but that increased subscribers may not necessarily lead to bigger profits since the cable and phone companies have typically had to resort to aggressive price cuts to attract customers.

Joseph Bonner, an analyst with Argus Research, said both companies also have specific customer-related issues they need to overcome. AT&T, for example, may benefit from having the iPhone in its arsenal but there is a perception that Verizon's 3G wireless coverage is better. Verizon, on the other hand, lacks a true must-have device.

"These companies have to keep proving themselves constantly. AT&T has a great phone with the iPhone but there are all these questions about network issues. Verizon has to continue to wow people with new products," Bonner said.

Still, Bonner thinks the two stocks may still be worth buying for some investors. They may never wow Wall Street with the type of profit growth that the Apples and Googles of the world enjoy, but both Verizon and AT&T do offer a bit of security for investors not willing to stomach a lot of market volatility.

Bonner said the worst of the declines in the landline business are probably behind the two companies and that this is factored into the stock prices. What's more, both have dividend yields of nearly 6%. The yield on a 10-year Treasury note, by way of comparison, is less than 4%.

"This year's rally has been for stocks that were beaten down and more risky. AT&T and Verizon both have strong dividends. They are safe havens," Bonner said.

Clement agreed, saying that the dividends make them attractive and that Verizon and AT&T should outperform other investments in a rough market.

But talk about damning with faint praise. If the best you can say about Verizon and AT&T these days is that they are probably a better bet than a government bond, it's no wonder most investors have shunned them.