Option Investor

Market Report - 1/21/05 2:25 PM EST

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A Rough Week For Market Bulls!

Stocks traded lower Friday, despite a glowing profit report from General Electric (NYSE:GE), the nation's largest company. The general said revenues jumped 18% in the fourth quarter as new acquisitions and a strong global economy helped speed a return to double-digit earnings growth. GE also reaffirmed its forecast that profits would grow 12% to 17% this year, and that growth should be sustained into 2006.

Shares of Dow component Verizon Communications (NYSE:VZ) were in the news as well after Deutsche Bank upgraded the company to "buy" from "hold," saying the recent decline in the stock represented a buying opportunity for investors. Shares of the telecommunications services giant edged higher in early trading as investors speculated that the recent decline in the stock was finally at an end.

Among the notable economic reports, researchers at the University of Michigan said consumer sentiment eroded in January. The university's consumer sentiment index fell to 95.8 in January from 97.1 in December, below the consensus forecast of Wall Street economists who had expected sentiment to rise to 97.4.

In the commodities segment, gold futures gained in afternoon trading amid conviction that the dollar's strength over the last few days was a temporary recovery. Crude futures also rebounded from one-week lows after the Organization of Petroleum Exporting Countries lifted its 2005 demand forecast. Colder than normal weather in the U.S. along with concerns over supply disruptions in the Middle-East provided further support to oil prices.

The fixed-income market saw treasurys move in a small range after the consumer sentiment data was announced. Analyst's noted that traders were still buying short-term notes and selling longer-term ones in a technical reversal of a recent trend.

Looking forward, equities will likely enjoy a "oversold bounce" in the coming week, but quashing the intermediate-term (bearish) trend will be a difficult task without some extremely positive catalysts. Until a new trading range is established, the best we can hope for is "manageable" volatility and a reasonably trouble-free path through the wreckage and debris created by the quarterly earnings season.

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