Dow Maintains Winning Streak

NEW YORK ( TheStreet) - Stocks finished mixed Tuesday as insight into the Federal Reserve's continued commitment to "QE2" sparked some buying among the blue chips but the other major indices took a breather from the recent rally.

The minutes of the Federal Reserve's December policy meeting were released late in Tuesday's session, and they showed the central bank saw no reason to alter its $600 billion bond-buying program, despite an improving economic outlook.

The Dow Jones Industrial Average settled in the positive territory, tacking on 19 points, or 0.2%, to 11,690 after bouncing off a session-low of 11,635. The index, which has risen in three straight sessions, sits at its highest closing level since August 2008. The S&P 500 slipped by a point, or 0.1%, to close at 1,270 and the Nasdaq Composite dropped 10 points, or 0.4%, to finish at 2,681.

Alcoa ( AA), Walt Disney ( DIS) and Hewlett Packard ( HPQ) were the top gainers within the Dow, while McDonald's ( MCD), Coca Cola ( KO) and Home Depot ( HD) were the biggest laggards. Twenty-one of the Dow's 30 components finished higher.

Alcoa was rallying for a second straight session as optimism grew on Wall Street ahead of the company's quarterly report next week. The stock was upgraded by Deutsche Bank on Monday in light of firmer aluminum prices.

Market breadth was weak with 63% of stocks on the New York Stock Exchange finishing lower and 35% advancing. Volumes were beginning to return to the market with more than one billion shares changing hands on the NYSE while the churn on the Nasdaq was about two billion.

The minutes of the December meeting of the Federal Open Market Committee showed a debate among Fed officials about the rise in bond yields. Bond yields have been inching up, running counter to the Fed's plan to lower long-term interest rates. A brighter economic outlook owing to recent data and President Obama's tax deal were cited as reasons for the rise in interest rates by Fed officials.

Still, while acknowledging that recent economic data has been more positive, the Fed indicated it's reluctant to make changes to its quantitative easing program as progress towards its dual mandate on inflation and unemployment was still "disappointingly slow."

"While the economic outlook was seen as improving, members generally felt that the change in the outlook was not sufficient to warrant any adjustments to the asset-purchase program, and some noted that more time was needed to accumulate information on the economy before considering any adjustment," the minutes said.

The Fed announced plans to purchase $600 billion worth of longer-term Treasury securities on Nov. 3, providing the markets with a second round of fiscal stimulus. The purchases are being made at a rate of roughly $75 billion per month and are projected to be completed by the end of the calendar second quarter of 2011.
Bernanke
Federal Reserve Chairman Ben Bernanke

Daniel Penrod, senior industry analyst at California Credit Union League, says the fact that the central bank is committed to continuing its program was not a surprise as it was still too soon to judge the effectiveness of its efforts.

"We won't know the impact of QE2 until the end of the first quarter," said Penrod. "The Fed is going to look at the numbers in February and March to understand what impact its purchases have made."

Penrod expects the upcoming policy meetings and statements of the Fed to be more of the same in the next couple of months. "Chairman Bernanke is going to continue beating the drum in that 'we are seeing positive trends in some areas, other areas are still weak'. Until there are better marks across the board, the Fed will maintain its stance."

Earlier, the Department of Commerce reported an unexpected increase of 0.7% to factory orders in November . That compares with a drop of 0.7% in October. According to Briefing.com, economists had been anticipating a 0.3% decline in November.

Despite the stronger report, basic materials and capital goods stocks bore the brunt of selling pressure, with a stronger dollar also adding to weakness in the sector.

Gold prices slumped as risk appetite returned and investors took profits . The February gold contract plunged $44 to settle at $1,378.80 an ounce.

The February crude oil contract shed $2.17 to settle at $89.38 a barrel, after hitting a 27-month high on Monday.

In corporate news, Atheros Communications ( ATHR) jumped 18% to $44 on reports that Qualcomm ( QCOM) was nearing a deal to take over the company at $45 a share. Shares of Qualcomm ticked higher by 1.6% to $50.97.

Advanced Micro Devices ( AMD) and Intel ( INTC) were prominent gainers Tuesday. Both companies are slated to unveil new chips at the Las Vegas Consumer Electronics Show, according to a report in the Wall Street Journal. Advanced Micro's stock rose 3.5% to $8.77 and Intel's stock was ahead by 1.4% at $21.15.

Supervalu ( SVU) was one of the worst-performing stocks within the S&P 500 as Morgan Stanley lowered its ratings on the company and fellow supermarket operator Safeway ( SWY) to underweight. The firm expressed concern about Supervalu's plan to lower prices for consumers amid rising food costs. Supervalu's stock was down 6.4% to $9 and Safeway's stock was off by 3.7% at $21.64.

Also Whole Foods ( WFMI), which was downgraded to market perform by BMO Capital Markets, saw its stock decline 3.4% to $49.04. The bearish sentiment weighed on the whole supermarket sector , pushing Kroger ( KR) down 1.4% to $21.70 and Winn-Dixie ( WINN) 3.5% lower to $6.84.

Shares of GM ( GM) were up 2.2% to $37.90 after the automaker reported a 7.5% sales increase in December .

Ford Motor ( F) said its auto sales grew 7% year-over-year last month. The stock advanced 13 cents to close at $17.38.

Macy's ( M) is strengthening its online business with plans to add 725 new jobs to the division. The stock finished down 1.4% to $25.09.

The dollar strengthened against a basket of currencies with the dollar index up by 0.2%. The benchmark 10-year Treasury note weakened 1/32, strengthening the yield to 3.338%.

.

Hong Kong's Hang Seng jumped 1% and Japan's Nikkei soared 1.7%. London's FTSE gained 1.9% and the DAX in Frankfurt lost by 0.2%.

--Written by Melinda Peer and Shanthi Bharatwaj in New York.
Disclosure: TheStreet's editorial policy prohibits staff editors and reporters from holding positions in any individual stocks.

If you liked this article you might like

Forecast for S&P 500, Dow Industrials Remains Bullish, These Charts Show

Forecast for S&P 500, Dow Industrials Remains Bullish, These Charts Show

Dow 20,000! It Should Mean Nothing to Investors, but Then Again...

Dow 20,000! It Should Mean Nothing to Investors, but Then Again...

Tradebird Investors Are Bullish on U.S. Stocks but Bearish on the Euro

Tradebird Investors Are Bullish on U.S. Stocks but Bearish on the Euro

Why Home Depot and Boeing Stock Fell Tuesday

Why Home Depot and Boeing Stock Fell Tuesday