Calm on Wall Street ahead of corporate earnings

[January 10, 2012]  (AP) -- Stocks drifted higher Monday in a fourth consecutive listless session. Traders waited for corporate financial results to start rolling in so they could look for clues about the economy.

In the unofficial kickoff to earnings season, Alcoa, considered an economic bellwether because so many companies use its products, said it lost $34 million from October through December because of lower demand for aluminum.

The loss amounted to 3 cents per share. Analysts surveyed by FactSet, a provider of financial data, had expected a loss of 2 cents per share. Alcoa said revenue was $6 billion, compared with an estimate of $5.7 billion.

The results were released after the market closed for the day. Alcoa stock finished up 2.9 percent, the biggest gain of the 30 companies in the Dow Jones industrial average. It was little changed in after-hours trading.

The Dow closed up 32.77 points, or 0.3 percent, at 12,392.69. The broader Standard & Poor's 500 index gained 2.89 points, or 0.2 percent, to 1,280.70. The Nasdaq composite index rose 2.34, or 0.1 percent, to 2,676.56.

Stock trading has been subdued in recent days. The Dow's high and low were only 75 points apart Monday. In all of 2011, trading was that narrow on only 26 days. In the final five months, the average daily swing was 249 points.

The broader market has been calm, too. The S&P rose 19 points Jan. 3, the first trading day of the year, but has risen or fallen by less than four points each of the following four days.

Volume was light Monday, as it has been all but one trading day this year, at 3.28 billion shares. Last year, about 4.3 billion shares changed hands on an average day.

Other markets were fairly quiet. The yield on the 10-year U.S. Treasury note fell to 1.96 percent from 1.97 percent Friday.

Analysts think profit growth slowed for U.S. multinational companies from October through December because of weaker demand overseas. Europe is on the brink of recession, and China's explosive economy is cooling.

Quarterly profits for S&P 500 companies will probably only grow at half the rate of the previous three quarters, said Sam Stovall, chief equity strategist at S&P's Capital IQ. The companies generate about half their revenue overseas, he said.

The U.S. is in a "half-speed recovery, and that probably isn't enough to offset the weakness in Europe and Asia," Stovall said.

Many analysts expect materials companies such as Alcoa to suffer as developing nations expand more slowly. Government-funded construction booms had driven up prices for metals and other basic products.

"China, India, Latin America -- that's where those companies have been really driving sales in the last few quarters," said John Butters, senior earnings analyst at FactSet.

He said investors should pay close attention to what companies say about their overseas sales for clues to their future performance.

Analysts with S&P Capital IQ took a brighter view of the materials sector. They said in a note to clients that rising prices for steel, gases and chemicals will help offset declining global demand.

Another reason to expect slower profit growth: The results for the last three months of 2011 will be compared with the last three months of 2010, which are not as easy to improve on as results from earlier in 2010.

In early 2010, the U.S. was just emerging from its deepest recession in decades. Changes in the economy since late 2010 have been less dramatic, so the comparisons are more challenging, Butters said.

European markets closed lower Monday. French and German leaders met to craft the regional fiscal treaty that they agreed to pursue last year. It was their first crisis summit of the year.

The treaty would strengthen controls of spending by the 17 countries that use the euro. Excessive borrowing by nations such as Greece and Italy has hurt the European economy and roiled the financial industry.

About two stocks rose for every one that fell on the New York Stock Exchange.

In other corporate news:

• Netflix Inc. shot up 13.8 percent after the company made its debut in Britain and Ireland. The stock has gained 28 percent this year, best in the S&P 500. Netflix traded above $300 last summer, then plunged to $62 after the company surprised customers with a price increase.

• CareFusion Corp. plunged 8.6 percent, the most in the S&P 500. The company, which makes medical equipment, announced preliminary results that were weaker than analysts had expected.

• Inhibitex Inc., which makes medicine to treat hepatitis C, soared 140 percent after Bristol-Myers Squibb said over the weekend that it would buy the company for $2.5 billion. Other developers of hepatitis C treatments followed the rally. Idenix Pharmaceuticals Inc. jumped 37 percent, and Achillion Pharmaceuticals Inc. added 22.7 percent.

[Associated Press; By DANIEL WAGNER]

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