By Carlos Guillen

After an encouraging start this morning, equity markets have been pulling back a bit but still remain on positive ground. So far the indication is that stocks are testing resistance at the 12,800 Dow level but are lacking the momentum to break above it sustainably. Better than expected Durable Orders results, encouraging initial claims data, and favorable comments from Greece came together early in the morning to lift equities from yesterday's level. However, later in the trading session, less than expected New Home Sales monthly results and a less than expected Leading Indicator Index appear to have knocked off a substantial part of the earlier gains.

Encouraging rumors and positive comments from German Chancellor Angela Merkel are calming some investor fears about the situation between private bond holders and the Greek government. According to the Chancellor, the Greek government and its private creditors were on track to reach an agreement. Next Monday the European Union summit will be focusing on how to boost growth and employment in Europe, and Greece will not be the center of attention. This is good news in that it should help mitigate volatility associated with the Greek saga.

Here at home, a measure of employment activity continued to remain below the 400,000 level, still indicating that the jobs market is still heading in the right direction. According to the Labor Department, initial claims during the week ended January 21 totaled 377,000, which increased from the 356,000 revised figure reported for the prior week and landed a bit above the Street's estimate of 375,000. Clearly encouraging is that four week moving average continues to ramp lower, a good indication that next Friday's jobs report will be favorable.

Another indication that the U.S. economy is recuperating was that durable orders climbed more than forecast in December, signaling that business investment will help support growth of our economy. Durable orders increased 3.0 percent in December, higher than the Street's estimate of 2.0 percent, on top of a 4.3 percent increase in November, which was revised from 3.7 percent.

Moreover, another report showed that the indexes of leading indicators improved although not as much as expected. Also sales of new U.S. homes unexpectedly declined in December for the first time in four months, capping the slowest year on record for builders; more on this below.

All in all, the sum of the forces is positive today, with the Dow Jones Industrial Average up slightly, testing resistance at 12,800; a break above this in the next couple of days may lead the market higher with firmer support.

Bernanke Aftermath
By David Urani

A day removed, the aftertaste of the Fed's FOMC statement seems apparent. Despite some soft economic data and a falling S&P index, commodities are trading higher along with a decreased dollar value. Oil, gold, copper and corn are trading up in the range of 1% to 2% along with others. In the last two days, oil is up approximately 2% and gold is up approximately 4%.

New Homes Soft but Sketchy

The Census' December new home sales report put a bit of a dent in the rally, with overall annually adjusted sales down 2.2% month to month to 307k, below the 320k consensus. Drops in the Midwest and South offset gains in the Northeast and West.

Certainly it's not a confidence inspiring number but I also think it's not as bad as it seems. The results mostly reflect volatility in the annual adjustments on the data. Mainly this month it was the South which showed a 10.1%, or 18k drop, after rising by 14.8%, or 23k, in the previous month. I think the better way to look at it may be to say that over the last two months, the South was up 5k. On the other end, there was the Northeast which increased by 46.7% month to month; the Census cited a 69.6% margin of error on this one so it should be taken with a hefty grain of salt.

We would have liked to see better from home sales, but we also feel the seasonal adjustments may be a bit too volatile to be reliable. Given that the headline reading was only down 2.2%, the margin of error on the data means it could have really been either way I think. Beyond sales, median price was down but average price was up, and supply fell slightly.