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Economic data, President's speech has traders hesitant

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Equities have been holding modest gains and trading steady since for the bulk of today's session as a stronger-than-expected December new home sales number was offset by the Conference Board's consumer confidence index, which fell to a nine-year low in December with a reading of 79.0.

This morning's 10:00 AM EST release of December new home sales (1.08 million versus estimates for 1.04 million) did find the markets nearing their best levels of the session, only to be offset by January consumer confidence (79.0 versus 78.5 consensus) which was inline with expectations, but concerning to investors as confidence fell to a nine-year low reading.

The above, combined with many market participants waiting to see what President Bush has to say in tonight's speech, where he is expected to outline the administration's latest thinking on Iraq as well as plans for a stimulus package, has stocks trading in the middle of this morning's highs and lows, but holding gains.

The major indexes have truly taken on somewhat of a "neutral" look into tonight's Presidential speech, as the major indexes all hover just above their daily pivots from our daily pivot analysis.

The Dow Industrials (INDU) 8,055 +0.81% holds above its daily pivot of 8,033 as Merck (NYSE:MRK) 54.32 +4.96% and Honeywell (NYSE:HON) $23.32 +4.1% offset weakness in telecom service providers and fellow Dow components AT&T (NYST:T) $18.72 -3.4% and SBC Communications (NYSE:SBC) $24.30 -2.25%.

This morning's forward looking guidance from Merck (MRK) with the company providing full-year 2003 EPS guidance of $3.40-$3.47 being above consensus of $3.39 not only helps MRK's price action today, but the broader Pharmaceutical Index (DRG.X) 286.82 +1.24%.

SBC Communications (SBC) trades lower after reporting Q4 earnings that met expectations, but forward looking guidance of low single-digit percentage declines in consolidated revenues for 2003 has some "growth bulls" apparently looking elsewhere as top- line growth doesn't appear to be in play until business hookups from a more robust economy develops.

Sector action has been rather range-bound, with early morning trading finding the bulk of sectors in the green, only to then show a more mixed look not long after the 10:00 AM EST data was released, to now see a slightly more bullish tent of green on trader's screens.

Earlier sector weakness in the Gold/Silver Index (XAU.X) 78.76 -1.03% has been cut in half, but still has the precious metals sector leading today's declines. Not far behind in the sector loser category is the North American Telecom Index (XTC.X) 434.89 -0.86%, which is being influenced by SBC forward guidance for 2003.

Many sectors are showing gains of just over 1% with the Utility Index (UTY.X) 247 +2.4% now holding today's sector winner spot after a rather severe two-week drubbing the sector has taken from the 270 level. Shares of Duke Energy (NYSE:DUK) $17.19 +3.49% are helping drive a rebound in the group after the utility reported earnings of $0.32 per share (excluding charges), which were 2-cents above consensus. Including charges, DUK said it would have lost $56 million, or $0.02 per share after taking charges of $70 million for employee severance expenses and $194 million for goodwill impairment from its European gas-trading unit.

Volume at the NYSE and NASDAQ are evenly matched with just over 860 million shares traded at each exchange.

Breadth at the NYSE is slightly positive with 17 stocks advancing versus 13 decliners, while NASDAQ breadth is even at 15 to 15.

New highs versus new lows is bearish with the NYSE reporting just 33 stocks achieving new highs, compared to 63 stocks hitting new lows. NASDAQ breadth in this category is almost identical at 33 to 66.

Jeff Bailey

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