Jim Cramer Blog

Gains in oil stocks helped push stocks higher Tuesday ahead of Fed statement Wednesday afternoon. The Dow ($INDU) ended the session with a gain of 32.53 points to 12,523.31. The S&P 500 ($SPX) added 8.20 points to 1,428.82. The NASDAQ ($COMPQ) tacked on 7.55 points to close at 2,448.64. Volume was lower on the session with the NYSE trading 1.53 billion shares and the Naz turning over 1.81 billion shares. Market breadth was positive by a 23-to-10 and 18-to-12 ratio on the Big Board and Naz respectively.Crude prices rose sharply Tuesday and though this is a negative in the long term for many companies, it did boost oil related stocks on the session. Oil gained more than five percent today, closing the session near $57 a barrel. As a result, the AMEX Oil Index ($XOI) gained nearly two percent. News that Saudi Arabia planned on cutting production further Thursday helped boost the commodity. A mild rise in consumer confidence as measured by the Conference Board in January helped boost economically sensitive stocks like Caterpillar (CAT) and Home Depot (HD). Within the report, the employment component saw strength, which helps support the view that the employment report on Friday will be strong. However, there were several earnings releases that put pressure on stocks Tuesday.Shares of 3M (MMM) fell 5.4 percent on the session after the company provided a disappointing outlook for 2007. The company blamed a decline in the housing and auto sectors as a reason for disappointing earnings growth in the fourth-quarter. When a company misses estimates and provides a pessimistic outlook, it tends to lead to a lower stock price. Shares of Merck (MRK) fell 1.3 percent Tuesday after the drug-maker only matched expectations as the company put away millions of dollars for lawsuit costs. Fellow drug-maker Wyeth (WYE) fell 2.5 percent on a disappointing earnings report as well. At the same time, Wyeth’s outlook for 2007 profits was a bit below estimates. Overall, the news didn’t put much of a hurt on the drug sector with the AMEX Pharmaceutical Index ($DRG) rising 0.11 percent. The FOMC meeting got started today and traders are being a little cautious ahead of the statement due out Wednesday afternoon. Though a change in rates is highly unlikely, there are concerns about what the Fed will say about inflation. With the economy showing strength of late, the Fed might become even more focused on combating inflation and this could lead to a Fed rate hike down the road.
Jody Osborne

Labels: CAT, DRG, HD, MMM, MRK, WYE