Stocks see minor gains Thursday on mixed economic news. Fed Chairman Bernanke spurred buying yesterday when he testified to the Senate Banking Committee. Today, though higher, stocks are taking a break as the Chairman continues his tour of Congress by speaking to the House Finance Committee. There has been mixed data on manufacturing today and the industrial production report came in well below expectations.
Shares of Caterpillar (CAT) are helping the Dow ($INDU) Thursday after the company announced a $7.5 billion stock buyback plan. This plan will run over the next five years and at current prices, equals approximately 17 percent of the company's outstanding shares. CAT is just about done with a $6.4 billion buyback plan that started in 2003. This news has benefited the stock, as is usually the case, with CAT shares up nearly three percent on the session.
Financial stocks are taking down the broader market today on concerns about bad housing loans in the U.S. The Wall Street Journal reported that many firms are trying to accelerate the process of unloading these loans. Shares of many large financial firms, like Merrill Lynch (MER) and J.P. Morgan Chase (JPM), are suffering on this news. Earlier this week, HSBC (HBC) warned that bad loans would hurt its profits.
In economic news, the Philly Fed Survey came in well below expectations at 0.6. The new orders component actually fell into negative territory, which points to contraction in the region. This was quite a contrast from the Empire State Index, which jumped to 24.4 from 9.1 last month.
Industrial production was a disappointment, falling 0.5 percent in January. Expectations were for a rise of 0.1 percent after a 0.5 percent gain in December. On a year on year basis, production was up 2.6 percent with manufacturing production up 1.8 percent. Overall, manufacturing activity continues to be hard to pin down. This sector of the economy has lagged, but has not pulled the economy down as much as some might expect. Even so, this lack of strength does bode well for interest rates, with the Fed unlikely to raise rates when inflation is not rising and manufacturing activity is weak.
Despite two straight days of strong gains, stocks are holding their own Thursday and this is a bullish sign. The fact is that despite strong gains, the bears can't seem to gain any sort of lasting strength. However, with the CBOE Market Volatility Index ($VIX) hitting support again near 10, some profit taking seems likely in the near term.
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