Wednesday, January 24, 2007

Dow Powers to New Record, eBay Piles On

Thanks to oodles of cash and some better-than-expected earnings reports from a handful of companies, the Dow Jones Industrial Average cruised to a new closing high today of 12,621.77, putting the fears that January would be a downer of a month pretty much to rest.

By adding nearly 88 points today on top of Tuesday's 56-point gain, the Dow is a cool 148 points on the plus side for 2007. While that's only a 1.2% bump, it's likely to be enough to keep January positive, which is a huge emotional buffer for the markets. So long as companies keep reporting earnings close to in line or better than expectations, the month will end on a high note, portending good things for the rest of the year.

The so-called January barometer actually tracks the S&P 500, and, according to the highly-regarded Stock Trader's Almanac the adage, "As goes January, so goes the year," is usually on-the-money. According to a February 1, 2006 report by U.S. News and World Report's Paul J. Lim,
85 percent of the cases since 1970, a positive gain in the S&P 500 in January has led to a positive year for stocks

With the S&P up 22 points or roughly 1.5%, we seem to be in safe territory, bearing in mind that there are only 5 trading days left in the month.

If one was to take out the days of the January Effect - the last trading day of the year and the first week of trading in the new year - a period notorious for dumping stocks - we're in very, very good territory. That's because the S&P bottomed at 1409.71, roughly 8 1/2 points below last year's close. But, that's enough of beating a worn and nearly dead horse. Suffice it to say we're setting up for another solid year of gains on the markets.

After the close, auction behemoth eBay released 1st quarter results and stunned investors with a dazzling report. Profits were 24% higher than last year's same period. Net income rose to $346.5 million, a healthy gain from the $279.2 million in Q4 2006. The 25 cents per share was well above analyst estimates of 19 cents.

Shares were bid up 1.38 prior to the release and added another 3.93 in after-hours trading. That's almost an 18% gain in one day. Not bad. The beat goes on...

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