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.

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.

STI edges down at midday

Asian stocks higher

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.

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.

Stocks break six-day win streak

Stocks hit new highs

NEW YORK (CNNMoney.com) -- Stocks ended a choppy session higher Monday, with the Dow, S&P 500 and Nasdaq managing fresh 2009 highs on some optimism about a recovery in retail sales and gains in select sectors.

The Dow Jones industrial average (INDU) rose 27 points, or 0.3%, according to early talies, ending at the highest point since Oct. 1, 2008. The S&P 500 index (SPX) gained 1 point, or 0.1%, and ended at the highest level since Oct. 1, 2008. The Nasdaq composite (COMP) rose 5 points, or 0.2%, ending at the highest point since Sept. 3, 2008.

Stocks had risen in the morning as investors welcomed a report showing some improvement in holiday retail sales. But the gains petered out as the session wore on, with investors pleading exhaustion after the recent run.

Stocks have now risen for six straight sessions, including the 3-1/2 days of last week's holiday shortened trading week. All financial markets closed early on Christmas Eve and were closed for Christmas.

The market finished the week with the Dow, Nasdaq and S&P 500 at record highs for the year, going back to levels not seen since the fall of 2008, just after the collapse of Lehman Brothers.

Year-to-date, the Dow is up 20%, the S&P 500 is up 25% and the Nasdaq composite is up 45%. But all three major indexes are up even more substantially since hitting multi-year lows on March 9 amid the height of the financial crisis.

The last week of the year is typically lightly-traded, with many Wall Street pros and individual investors taking part or all of the week off. This year in particular, investors are unlikely to mess with their portfolios in the last days, unless it is to lock in a little in the way of profits.

All financial markets are active Thursday ahead of New Year's Eve, but are closed Friday for New Year's Day.

Retail: In what could be a positive sign for the consumer spending outlook, sales at U.S. retailers look to have risen in the all-important holiday shopping period.

Early estimates from the National Retail Federation (NRF) suggest sales in November and December fell 1%, an improvement from a 3.4% drop for the same period a year ago.

Sales at U.S. retailers rose 3.6% between November 1 and Christmas Eve, according to a report released by SpendingPulse, a unit of MasterCard, Reuters reported.

However, the retail sector showed little reaction Monday, with Amazon.com (AMZN, Fortune 500), Saks (SKS) and Macy's (M, Fortune 500) among the few gainers.

Airlines: Stocks in the industry were under pressure after a passenger on a Northwest flight heading from Amsterdam to Detroit Friday allegedly attempted to ignite an explosive.

The incident prompted an increase in the security measures airports and air carriers are taking, particularly on international flights into the United States.

Continental Airlines (CAL, Fortune 500), American Airlines parent AMR (AMR, Fortune 500) and Northwest parent Delta Air Lines (DAL, Fortune 500) were among the air carriers sliding.

On the move: Among others movers, Fannie Mae (FNM, Fortune 500) and Freddie Mac (FRE, Fortune 500) both rallied after the Treasury Department removed its $400 billion cap on the amount of money it will spend to keep the companies afloat. Treasury said it will now increase support depending on how much each company loses per quarter.

Fannie and Freddie are government-run mortgage lenders that own or guarantee about half the mortgages in the country.

But the two stocks were an exception in an otherwise weak bank sector.

World markets: Asian markets ended mixed. In Europe, Germany's DAX rose 0.8% and France's CAC 40 added 0.9%. British markets were closed for the Boxing Day celebration.

Commodities and the dollar: COMEX gold for February delivery rose $3.10 to settle at $1,107.90 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 rose 72 cents to settle at $78.77 a barrel on the New York Mercantile Exchange.

The U.S. dollar fell versus the euro and gained against the yen.

Bonds: Treasury prices fell, raising the yield on the 10-year note to 3.83% from 3.80% late Thursday. Prices had been even lower ahead of the latest auction of two-year note, which saw lighter demand than in recent months. Treasury prices and yields move in opposite directions.

Market breadth was mixed. On the New York Stock Exchange, losers beat winners eight to seven on volume of 430 million shares. On the Nasdaq, decliners topped advancers eight to five on volume of 950 million shares.