MarketView for January 28

Summary

The major equity indexes recovered somewhat on Tuesday after Pfizer's upbeat results offered up some relief from the pain of the Dow's five-day losing streak, as the market's focus turned to the Federal Reserve's next move on stimulus.

The market's advance, which also broke the S&P 500's three-day slide, came after heavy losses tied to concerns about the withdrawal of U.S. monetary stimulus as well as worries about emerging markets, including a slowdown in China's growth and political turmoil from Turkey to Thailand.

After the close, index futures rallied on the news that Turkey's central bank had sharply raised its interest rates. S&P 500 e-mini futures rose 20 points on volume of 1.7 million contracts.

Wednesday will bring the conclusion of the Fed's two-day policy meeting, with investors anxious to hear whether the Fed will cut another $10 billion from its monthly bond-buying program. In December, the central bank announced plans to scale back its stimulus.

Bucking Tuesday's trend, Apple fell 8 percent to close at $506.50 - its worst slide in a year - a day after holiday iPhone sales missed expectations. Apple's slide limited the gains of the S&P 500 and the Nasdaq. The tech bellwether's iPhone sales in the holiday shopping season missed lofty expectations and the company forecast weak revenue for the current quarter in its quarterly results. 

Shares of Pfizer ended the day up 2.6 percent to close at $30.42, boosting both the Dow and S&P 500 after the company reported a better-than-expected quarterly profit. Nonetheless, the S&P 500 remains below its 50-day moving average, after closing below it on Friday for the first time since October 9.

A bright spot in the day's economic data was a report showing U.S. consumer confidence rose in January. Consumers grew more optimistic about both business conditions and the job market, according to the Conference Board.

However, orders for long-lasting U.S. manufactured goods unexpectedly fell 4.3 percent in December, and a gauge of planned business spending on capital goods also slid, which could cast a shadow on an otherwise bright economic outlook.

After the bell, shares of audio chipmaker Cirrus Logic, an Apple supplier, fell 4.6 percent to $17.87 as it forecast fourth-quarter revenue far below Wall Street's estimates. In the regular session, Cirrus shares declined 4.5 percent to end at $18.74.

During the regular session, activist investor Carl Icahn said he bought another half-billion dollars' worth of Apple stock, his third investment in the iPhone and iPad maker in less than a week. The purchase increases his stake to more than $4 billion.

Shares of D.R. Horton rose 9.8 percent to $23 after the largest U.S. homebuilder reported a 4 percent rise in quarterly orders.

In another snapshot of the economy, U.S. single-family home prices in November rose slightly more than expected from the previous month, while the increase from a year ago was the biggest in almost eight years, a closely watched survey showed.

In other moves after the bell, shares of Yahoo (YHOO.O) fell 3.9 percent to $36.75 after the company's results showed revenue declined for the fourth consecutive quarter.

Shares of AT&T fell 1.7 percent to $33.12 after the company reported slower wireless subscriber growth in the latest quarter than Wall Street had estimated.

Volume was slightly below average for the month. About 6.6 billion shares changed hands on U.S. exchanges, compared with the average of 6.9 billion so far this month, according to data from BATS Global Markets.

Durable Goods Orders Fall

Orders for long-lasting U.S. manufactured goods unexpectedly fell in December as did a gauge of planned business spending, casting a shadow on an otherwise bright economic outlook. The economy, however, has not completely lost its luster. Consumer confidence hit a five-month high in January and house prices posted their biggest year-on-year gain in almost eight years in November, other reports showed on Tuesday.

Durable goods orders dropped 4.3 percent in December, weighed down by weak demand for transportation equipment, primary metals, fabricated metal products, computers and electronic products and capital goods. Last month's decline was the largest since July and reversed November's revised 2.6 percent rise.

The report put a wrinkle on the economy's outlook, which had been bolstered by upbeat data on consumer spending and industrial production, and it raised concerns of slower growth in the first quarter. Those concerns, however, were tempered by the rise in consumer confidence and house prices.

The Conference Board said its index of consumer attitudes rose to 80.7 this month from 77.5 in December. January's reading was the highest since August and reflected rising optimism among households about the labor market and business conditions.

Separately, the Standard & Poor's/Case Shiller gauge of house prices in 20 metropolitan areas increased 13.7 percent in November from a year ago, the largest rise since February 2006.

Durable goods orders fell last month despite a strong rise in aircraft orders at Boeing. The company had reported receiving orders for 319 planes last month compared with 110 in November.

One reason may have been because the model used by the government to iron out seasonal fluctuations likely anticipated a big increase in aircraft orders in December anyway. Excluding transportation, orders fell 1.6 percent, the biggest decline since March, after edging up 0.1 percent in November.

While durable goods data is volatile, details of the report could support views that factory activity will cool off early this year after output grew at its fastest pace in nearly two years in the fourth quarter.

Non-defense capital goods orders excluding aircraft, a closely watched proxy for business spending plans, fell 1.3 percent after rising by a revised 2.6 percent in November. Economists had expected orders for these so-called core capital goods to increase 0.5 percent in December after a previously reported 4.1 percent surge in November.

Shipments of core capital goods, which are used to calculate equipment spending in the government's measure of gross domestic product, slipped 0.2 percent last month. They had increased 2.3 percent in November, with farm machinery accounting for much of the rise.

While the decline in shipments suggests a less sturdy pace of equipment spending in the fourth quarter, that was offset by a solid rise in inventories, indicating a fairly strong fourth-quarter GDP reading.

Durable goods inventories increased 0.8 percent last month, pushing the inventory-to-shipments ratio to an eight-month high.