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Mild gains for stocks to start a busy week of earnings news. The Dow ($INDU) tacked on 20.09 points, closing the session at 11,980.60. The S&P 500 ($SPX) added 3.43 points to 1,369.05. The Nasdaq ($COMPQ) gained 6.55 points to close at 2,363.84. Volume was a bit lighter with the NYSE trading 1.44 billion shares and the Naz turning over 1.85 billion shares. Market breadth was positive by a 23-to-10 and a 19-to-11 margin on the Big Board and Naz respectively.

Earnings were light this morning, but this will pick up starting tomorrow. Mattel (MAT) earned 62-cents a share in the third quarter on revenues of $1.79 billion. This was a seven percent rise in revenues earnings bested estimates by a penny a share. The stock added more nearly three percent on the news to close at a new 52-week high of $21.30. 

Oil prices kept a lid on gains Monday with crude rising $1.37 a barrel to close at $59.94. News that OPEC would hold an emergency meeting to discuss oil prices lifted crude prices. This news outweighed the cartel’s cut to its 2006 forecast for oil demand. Natural gas prices were also a negative for stocks with this commodity up 78.5-cents on the session, a gain of 13.8 percent. With cold weather hitting much of the country, worries about supply are “heating” up. 

In economic news, the NY Empire State Index saw strength when a mild decline was expected. This measure of manufacturing activity in the New York area rose to 22.9 in October from 13.8 in September. Economists were looking for a reading near 11.0 during the month. Within the report, the prices paid index fell to 30.8 from 41.0. Although still elevated, this component is definitely seeing a slowing, mainly due to a drop in energy prices. 

Analyst comments had a major impact on stocks Monday with Home Depot (HD) and General Electric (GE) suffering from negative comments. HD shares fell 1.5 percent to $36.35 on the session after Goldman Sachs cut its rating on the stock to “Neutral” from “Buy.” Goldman is worried that recent management departures are a problem for the company. As a result, Goldman upgraded competitor Lowe’s (LOW) to “Buy” from “Neutral.”

GE shares fell 1.2 percent to $35.56 on the session after Merrill Lynch lowered its rating on the conglomerate to “Neutral” from a “Buy.” Merrill feels there are risks to GE’s future estimates and that investors might turn to less defensive stocks if energy prices continue to moderate. Citigroup didn’t necessarily agree with this assessment, keeping its rating on the stock at a “Buy”, although the broker did lower its earnings estimate by two cents to $1.98 a share. 

Jody Osborne
Senior Staff Writer & Options Strategist
Optionetics.com ~ Your Options Education Site

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