"Today in the Market" Market WrapUp by Chris Puplava

The Dow Jones Industrial Average broke through 11,000 in midday trading after disappointing news from DuPont, which issued a profit warning causing concern over the upcoming 4th quarter earnings season. The profit warning from DuPont comes on the heels of poor reports from Alcoa (AA) and Phelps Dodge (PD) earlier in the week. PD slashed its forecast for 4th Q earnings by more than 70% due to production and sales shortfalls of copper and molybdenum and price hedges. PD production was down due to a delay producing higher ore grades at its Candelaria mine in Chile. Alcoa’s 4th Q profit fell 16% due to higher energy costs and impaired refinery activity from Gulf Coast hurricanes even in the face of higher product prices.

In economic news, the Energy Information Administration (EIA) petroleum status was released today. Crude inventories for the January 6th week fell 2.9 million barrels to 318.7 million barrels, declining more than expected though the news was offset by an increase in gasoline and distillate inventories that exceeded estimates. Gasoline stocks rose sharply, up 4.5 million to 208.8 million, with an increase of 4.0 million in distillates to 133.8 million, leaving distillate stocks in their upper half of their seasonal range. Refinery capacity stood at 89.8% though gasoline production fell sharply last week. The higher gasoline prices are keeping demand in check, with demand up only 1% year-over-year, while distillate demand is up 2.5%.

February crude initially traded lower but has since rebounded up $1.15 to $64.45, up 1.82%. February heating oil was and natural gas futures fell slightly, down 0.57% and 1.28% respectively. The AMEX natural gas index (XNG) fell nearly 5 points in early morning trading before rebounding to as high as 417.37, a gain of 2.02 points. Similar action was seen in the AMEX oil index (XOI), falling initially 11 points before rebounding to a high of 1077.21, a gain of more than 10 points.

In Sector news, Countrywide Financial Corporation shares rose after its December mortgage fundings rose 27% from year ago levels. Stanford Kurland, chief operating officer, said in a press release, "With the continuation of relatively low interest rates throughout the year, as well as Countrywide's market share growth, the company generated record mortgage loan production volume of $491 billion. This amount surpassed Countrywide's prior record set in 2003, and also appears to be a new industry record." The Philadelphia Bank Sector Index ($BKX) climbed 0.12% and the S&P Insurance Index (IUX) rose 0.55%.

Technology stocks were mixed in early trading Wednesday with Apple Computer Inc. rising for a second day on continued iPod sales, though SanDisk Corp. slipped on valuation concerns by J.P. Morgan who downgraded the company to neutral from overweight citing the stock's current value. Hewlett-Packard was up 0.75% after being upgraded by Prudential Equity Group to overweight from neutral weight, while a buy rating was placed on Broadcom by UBS. The AMEX Technology select Sector spider (XLK) was up 1.13% with the Philadelphia Semiconductor Index (SOX) up 1.71%, and the tech-heavy NASDAQ Composite Index also posting a gain, up 0.50%.

Telecoms were advanced higher today as Ciena Corp (CIEN) was up as much as 4% before giving back some of its gains, last up 1.42%. Verizon Communications (VZ) was last near its high of the day, last up 0.92%, with Qwest Communications International (Q) also last near its high, up 4.01%. The AMEX North American Telecommunications Index (XTC) was up 7.0 points to 767.43, up 0.92%.

In other news as gold is hitting generational highs, with gold spot prices up today $2.78 an ounce to $546.68, all eyes will be watching the Producer Price Index (PPI) report that is due out Friday with the Consumer Price Index (CPI) to be released next Wednesday. The consensus range for the PPI is a 0.4% month-to-month change on the heels of a 4% drop in November due primarily to a drop in energy prices, which have been on the rise.

I’d like to put below the thoughts on gold by Dr. Stephen Leeb, Editor for The Complete Investor, from his January 9th market update:

“Despite being at generation highs, gold gets nowhere near the headlines and coverage of stocks like Google.

Even more glaring, the recent Fed meeting notes made absolutely no mention of gold. This neglect is striking because for the past 2,000 to 3,000 years, gold has been the best long-term indicator of inflation. Inflation, as you know, means the declining value of money. And when people realize the value of paper money is falling, they generally switch their savings from paper to gold.

When the Fed fails to mention gold when discussing inflation, it’s a bit like complaining about the service on the Titanic while ignoring the fact that the ship is sinking (Italics added for emphasis). For if they did mention gold…The price of gold, and market forces, would become more important than Fed policy. If that happened, the most influential force in the American economy would become the government of China, which could affect the exchange rate between gold and the dollar with a bat of an eye…To acknowledge gold’s importance would be to hand monetary policy over to forces outside the Fed’s control. It would be the last thing any government official would want.”

Looking at the trend in the CPI on a year-over-year basis shows a clearly upward trend, obviously from a spike in energy after the hurricanes last year.

The potential for another spike in energy prices this year seems almost inevitable. Weather forecasters are calling continued above-average hurricane activity due to multi-decadal fluctuations in Atlantic hurricane activity, with alternating periods lasting several decades of generally above-normal or below-normal activity. Adding to a high likelihood of above-normal hurricane activity that can raise oil prices is the geopolitical risk of Iran. Iran recently restarted its nuclear research after a two-year freeze by the U.N. despite Western opposition. Iran’s President Mahmoud Ahmadinejad shrugged off the international outcry saying his country will not be bullied and would push ahead with the program. An even sharper tone came from former President Hashemi Rafsanjani who said, “If they cause any disturbance, they will ultimately regret it. Even if (the Westerners) destroy our scientists, their successors would continue the job,” in a speech aired on state TV.

As the political climate heightens over the middle-east and another strong hurricane season on the horizon, energy companies and alternatives stand to post another strong year and should be watched closely along with gold.

Index	Price	Price Change	Today's % Price Change	Week To Date % Price Change	1 Month % Price Change
Dow Jones Industrial Avg.	11,043.92	32.34	0.3%	0.8%	2.5%
S&P Dep. Receipts	129.33	0.43	0.3%	0.7%	2.4%
Nasdaq Composite Index	2,331.36	11.04	0.5%	1.1%	3.3%
Nasdaq 100 Trust	43.21	0.33	0.8%	3.1%	3.6%
Dow Jones Transportation Avg.	4,199.29	-19.40	-0.5%	-0.4%	2.4%
Dow Jones Utility Avg.	412.53	-1.27	-0.3%	-0.6%	0.7%
Inter@ctive Internet Index	190.13	1.16	0.6%	0.7%	7.1%