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Stocks End Choppy Trading Day Nearly Flat - U.S. Commentary


After showing a lack of direction throughout the session, stocks ended Friday's trading roughly flat. The choppy trading came as traders seemed reluctant to make any significant moves ahead of the release of a slew of key earnings news next week.

The major averages eventually ended the day near the unchanged line, with the S&P 500 edging down 0.07 points or less than a tenth of a percent to 1,472.05. The Dow inched up 17.21 points or 0.1 percent to 13,488.43 and the Nasdaq crept up 3.87 points or 0.1 percent to 3,125.63.

For the week, the major averages all moved to the upside. The Nasdaq advanced by 0.8 percent, while the Dow and the S&P 500 both rose by 0.4 percent.

The lackluster performance on Wall Street came as traders expressed some uncertainty about the outlook for the markets after recent gains lifted the S&P 500 to a five-year closing high on Thursday.

Since earnings season is only just starting to pick up steam, traders seemed to take a wait-and-see approach as more big-name companies release their quarterly results in the coming weeks.

Mixed news from overseas also contributed to the choppy trading after upbeat news from overseas helped to push stocks higher in the previous session.

While news of a new $116 billion stimulus package in Japan generated some positive sentiment, a report from China showing an acceleration in the pace of inflation suggested that the Chinese may not provide further stimulus.

Meanwhile, traders largely shrugged off a report from the Commerce Department showing that the U.S. trade deficit unexpectedly widened in the month of November.

With a jump in imports more than offsetting an increase in exports, the trade deficit widened to $48.7 billion in November from a revised $42.1 billion in October. Economists had expected the deficit to narrow to $41.1 billion.

Sal Guatieri, Senior Economist at BMO Capital markets, said, "A wider U.S. trade gap will weigh on Q4 growth, but a rebound in imports suggests domestic demand has turned up."

Among individual stocks, shares of Wells Fargo (WFC) moved to the downside even though financial services giant reported fourth quarter earnings and revenues that exceeded analyst estimates.

Wells Fargo, the nation's largest mortgage lender, reported fourth quarter earnings of $0.91 per share on revenues of $21.9 billion. Analysts had expected the company to earn $0.89 per share on revenues of $21.3 billion.

On the other hand, shares of Infosys (INFY) surged up by 18.8 percent after the software services provider reported better than expected third quarter results and raised its full-year revenue guidance.

Sector News

Most of the major sectors ended the day showing only modest moves, contributing to the roughly flat close by the broader markets.

Nonetheless, steel stocks came under pressure on the heels of the news out of China, dragging the NYSE Arca Steel Index down by 1.5 percent. With the loss, the index pulled back further off the eight-month closing high it set last Wednesday.

While banking and defense stocks also saw moderate weakness, airline stocks showed a strong move to the upside. The NYSE Arca Airline Index surged up by 1.4 percent to a nearly two-year closing high.

Biotechnology, internet, and electronic storage stocks also saw some strength on the day, although buying interest was relatively subdued.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region turned in a mixed performance during trading on Friday. Japan's Nikkei 225 Index surged up by 1.4 percent, while China's Shanghai Composite Index tumbled by 1.8 percent.

Meanwhile, the major European markets moved modestly higher on the day. While the U.K.'s FTSE 100 Index rose by 0.3 percent, the French CAC 40 Index and the German DAX Index both edged up by 0.1 percent.

In the bond market, treasuries turned higher over the course of the trading session after seeing early weakness. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, ended the day down by 1.9 basis points at 1.875 percent after reaching a high of 1.93 percent.

Looking Ahead

Earnings news is likely to move into the spotlight next week, with JP Morgan (JPM), Goldman Sachs (GS), American Express (AXP), Bank of America (BAC), UnitedHealth (UNH), Citigroup (C), Intel (INTC), and General Electric (GE) among the companies due to report their quarterly results.

Economic data may also attract some attention next week following the relatively light economic calendar over the past week. Traders are likely to keep an eye on reports on retail sales, industrial production, housing starts, and consumer and producer price inflation.

Trading could also be impacted by remarks by Federal Reserve Chairman Ben Bernanke, who is due to speak at the University of Michigan next Monday.

by RTTNews Staff Writer

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