Investors Eye the Dollar, Alcoa Earnings
{{#rendered}} {{/rendered}}U.S. stock market futures pointed to a consolidation Tuesday after the Dow industrials closed above 11,000 Monday, the first time in more than four years. Alcoa's (AA) weaker-than-forecast earnings are depressing sentiment Tuesday.
S&P 500 futures dropped 3.9 points at 1,291.0 and Nasdaq 100 futures fell 7.5 points at 1,747.0.
Profit taking also was seen in European and Asian markets, with Tokyo's Nikkei 225, Frankfurt's DAX 30 and London's FTSE 100 all lower.
{{#rendered}} {{/rendered}}On Monday, the Dow Jones industrial average rose 52.6 points to 11,011, led by General Motors Corp. (GM)after a broker upgrade. The Nasdaq Composite index tacked on 13 points at 2,318 and the S&P 500 rose 4.7 points at 1,290.
"Consolidation now is probably a good thing," said Hilary Cook, director of investment strategy for Barclays Private Clients in London.
"We would prefer that markets rise steadily rather than be too volatile," she added.
{{#rendered}} {{/rendered}}Besides profit taking, market sentiment may be affected by results from Alcoa Inc., the world's biggest aluminum producer, which slipped 4.7 percent in Frankfurt trade.
The Dow component posted a sharply lower fourth-quarter profit due to a long list of production outages, strikes and restructuring costs.
Elsewhere, the data schedule is fairly light, with weekly chain store sales and wholesale inventory data due for release.
{{#rendered}} {{/rendered}}The dollar was lower against major currencies, with the yen up 0.2 percent after a report in the Washington Post that Chinese officials are determined to diversify their dollar holdings.
The report, quoting an unnamed Chinese economist, was contradicted by comments from China suggesting that it was only future reserves that may be diversified.
China did say it may use some of its foreign reserves holdings to buy oil. Front-month crude recently rose 63 cents at $64.13 a barrel.
{{#rendered}} {{/rendered}}Of other companies in focus, Credit Suisse First Boston downgraded the multi-industry sector to market weight from overweight following an 81 percent share price rise since early 2003, and downgraded United Technologies Corp. to neutral from outperform. CSFB downgraded United Technologies, a component of the Dow industrials, and American Standard Cos., saying there's higher upside in other outperform-rated names. CSFB likes United Tech's larger Dow industrials peer, General Electric Co. (GE).
"We believe service and diversification will drive top-line growth across the portfolio and investors will again recognize the company's capacity to sustain mid-teens operating profit growth and very solid organic growth well north of its peers and two to three times GDP," CSFB said.
Another Dow component making news was Home Depot Inc., (HD) which agreed to buy Hughes Supply Inc., a distributor of construction, repair and maintenance products, for $3.47 billion, or $46.50 a share and the assumption of $285 million in debt.
{{#rendered}} {{/rendered}}The addition of Orlando, Fla.-based Hughes Supply (HUG) more than doubles the size of Home Depot with projected 2006 combined sales approaching $12 billion. The deal is expected to lift Home Depot's earnings in the first year.
Hughes Supply closed Monday at $38.55 a share.
Elsewhere, International Flavors & Fragrances Inc. said it will eliminate abou 300 manufacturing, selling, research and administrative jobs, principally in its European and North American operations.
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