MarketView for Febuary 10

Summary

Stocks ended the first trading day of the week with modest gains on Monday as the Street digested last week’s market gains and looked ahead to the remarks by Federal Reserve Chair Janet Yellen before lawmakers. Yellen's prepared remarks will be available before the market opens on Tuesday. She will also participate in a question-and-answer session with U.S. lawmakers after the open.

The Nasdaq was helped out by the strength of large-cap tech and pharmaceutical names. Nonetheless, most on the Stgreet took a wait-and-see attitude ahead of the testimony, looking for confirmation that the Fed would not change its schedule for ending its support for the economy.

The Fed's accommodative monetary policies have been credited with fueling the market's steep gains in 2013, and are expected to keep a floor under equity prices for as long as they continue.

The Fed first announced a slowing in the bond-buying program in December, followed by another one in January. If it changes the pace of tapering - and uncertainty in emerging markets and the weak January payrolls have raised the odds of that to some - it may raise concerns that the economy is still not strong enough to strengthen on its own.

The S&P 500 is coming off its best two-day performance in four months, which capped the index's first weekly gain in the past four. Those gains were preceded by the index's sharpest pullback in months.

McDonald's reported a drop in January same-store sales, although global sales were above expectations. Nonetheless, the shares fell 1.1 percent to end the day at $94.86.

Alexion Pharmaceuticals was a top gainer on the Nasdaq 100, ending the day up 4 percent to close at $170.11 after Deutsche Bank raised its price target to $205 from $125.

Hasbro was the S&P's top percentage gainer, rising 4.5 percent to $52.36. The toymaker reported quarterly results and gave an upbeat outlook.

With about 69 percent of the S&P 500 having reported, 67.8 percent have exceeded earnings expectations, above the long-term average of 63 percent, according to Thomson Reuter’s data. Almost 66 percent have exceeded revenue forecasts, above the historical average of 61 percent.

After the market closed, voice technology company Nuance Communications (NUAN.O) fell 2.3 percent after reporting its first-quarter results.

CNA Financial indicated that it would sell its life and group insurance business, while parent Loews reported a larger quarterly loss, hurt by impairment charges. CNA gained 6.9 percent to $42.42 while Loews lost 4.2 percent to $43.26 as the worst performer on the S&P 500.

Yelp ended the day up 1.9 percent to close at $91.11. The Wall Street Journal reported on Saturday Yahoo was partnering with Yelp to enhance the local results in its search engine. Yahoo ended the day up 1.4 percent to close at $37.76.

Apple gained 1.8 percent to close at $528.99 after Carl Icahn said in a letter to shareholders he sees no reason to persist with his proposal that the iPhone maker buy back $50 billion of its shares.

AutoNavi Holdings chalked up a gain of 24.4 percent to close at $20.57 after the Alibaba Group disclosed in a filing with the SEC that it had offered to buy all the shares of the Chinese digital mapping and navigation firm it does not already own.

Approximately 5.83 billion shares changed hands on the major equity exchanges, according to BATS exchange data.

You Have to Know When to Fold’em

Carl Icahn has backed off from his campaign of trying to force Apple to increase its stock buybacks, citing the company's recent repurchases as well as an influential proxy adviser's call against his proposal.

In a letter to Apple shareholders on Monday, Icahn wrote he was dropping his non-binding proposal to force Apple to add another $50 billion to its stock buyback plan, "especially when the company is already so close to fulfilling our requested repurchase target."

For months Icahn had been asking Apple to boost its stock buyback program, proposing the iPhone maker repurchase another $50 billion. On Sunday, Institutional Shareholder Services recommended shareholders vote against Icahn's nonbinding proposal, saying the motion would "micromanage" how the company uses capital.

Proxy advisory firm Egan-Jones has also recommended voting against Icahn's plan, which was up for a vote at Apple's February 28 shareholders meeting.

Apple CEO Tim Cook told The Wall Street Journal last week he wanted to be "aggressive" and "opportunistic" in buying back shares. He pointed out the company had repurchased $14 billion in stock in the two weeks since reporting financial results that disappointed Wall Street.

With the latest purchases, Cook recently said Apple had bought back more than $40 billion of its shares over the past 12 months. He said it was a record for any company over a similar span.

Icahn wrote in his open letter that Apple's recent share buybacks, amongst the largest in history, have been a bit like "bailing with a leaky bucket," given the scale of its cash reserves - though they were enough to placate him.

"As Tim Cook describes them, these recent actions taken by the company to repurchase shares have been both 'opportunistic' and 'aggressive' and we are supportive," Icahn wrote.

Apple had almost $160 billion in cash at the end of 2013.

Icahn has provided a blow-by-blow account on Twitter of every new investment he has made in Apple this year as well as pleas to Apple on an aggressive buyback.

Not everyone is amused. Anne Simpson, senior portfolio manager of investments and director of corporate governance for the California Public Employees' Retirement System, which owns close to $1.6 billion in Apple shares, recently told CNBC that Icahn was engaged in "megaphone diplomacy."

In a statement to Reuters on Monday, Simpson said: "We welcome Icahn's move to drop his proposal. Any distribution of cash should be undertaken by a company's board after thoughtful and strategic planning, and be in the best interest of the company and all shareholders. Apple has indicated that it has a plan and has already begun distributing capital to shareholders. We believe this is a more prudent approach. We need to tend the goose that lays the golden egg."