MarketView for December 16

Summary

The major equity indexes were not to be denied on Thursday, and by the closing bell they were all in positive territory as economic bellwether FedEx offered a bullish profit outlook that augured well for broad economic growth. Stocks that performed well in 2010 were among Thursday's best performers as investors sought to add to their returns prior to the start of the New Year.

FedEx raised its full-year outlook, despite the fact that its quarterly earnings and revenue numbers missed expectations. As a result, the company’s shares managed to end the day up 2 percent to close at $94.22. Tagging along was its larger rival United Parcel Services, which ended the day up 2.1 percent to close at $73.76.

Visa and MasterCard ended the day lower on heavy volume after the Federal Reserve issued a proposal that would force banks and card networks to substantially reduce the fees they charge retailers on debit cards. Visa ended the day down 13 percent to close at $67.19, while MasterCard closed down 10 percent at $223.49.

Stocks gained momentum after a slow start to the day, with big gainers for the year sending the Nasdaq well into positive territory. Intuit managed a gain of 3 percent to close at $49.35 after rising about 60 percent for the year. Some shares raised hopes consumers will be less frugal over the holiday shopping season. Amazon.com rose 1.4 percent to $178.10 and its stock is up 32 percent for the year.

After the closing bell, Oracle reported a significant increase in new software sales for its second quarter, sending its shares 3.2 percent higher to close at $31.24. Starbucks closed up 2.3 percent to $32.59 after Goldman Sachs gave the coffee chain a "conviction buy" rating with a $44 price target. Research in Motion closed up 1.8 percent at $60.28 after the company reported its third-quarter results after the close.

Economic data added to the positive mood. Factory activity in the mid-Atlantic region unexpectedly rose in December, while jobless claims dipped for a second week. November housing starts were higher, while permits for future home construction fell to a 1-1/2 year low.

About 7.54 billion shares were traded on the New York Stock Exchange, the American Stock Exchange and the Nasdaq, well below the year's daily average of 8.62 billion.

Unemployment Numbers Improving

Jobless claims fell for a second consecutive week, suggesting that growth in the labor market was continuing. At the same time, data on home construction indicated that sector remains stressed even as the economy continues to expand.

According to a report released by the Labor Department Thursday morning, initial claims for unemployment insurance fell by 3,000 claims to a seasonally adjusted 420,000 claims. The four-week moving average of claims, considered a better measure of labor market trends, touched a new two-year low.

A separate report from the Commerce Department indicated that housing starts were up 3.9 percent to a seasonally adjusted annual rate of 555,000 units. However, permits for future home construction fell to a 1-1/2 year low. October's housing starts were revised up to a 534,000-unit pace from the previously reported 1-1/2 year low rate of 519,000 units.

Despite last month's pick-up in residential construction, housing remains weak as high unemployment weighs on demand and homeowners' ability to hang on to their properties, lagging an acceleration in broader economic activity.

A survey on Wednesday showed sentiment among home builders was mired at record low levels this month, suggesting residential construction will again hold back gross domestic product growth in the fourth quarter.

New building permits fell 4.0 percent to a 530,000-unit pace last month, the lowest since April 2009, after a 0.9 percent increase in October. Permits were dragged down by a 23 percent plunge in the volatile multi-family segment. Permits for single-family homes rose 3 percent last month.

Groundbreaking last month was lifted by a 6.9 percent rise in single-family home construction. Starts for the multi-family segment, however, fell 9.1 percent. New home completions fell 14.1 percent to a record low of 513,000 units in November.