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Midday Market Update

Stocks Mostly Lower Following Data, Debt Worries

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U.S. Market
Stocks were down at midday as the market digested mixed data as well as concerns about the debt ceiling. Treasury prices rose as investors sought safety. 

The Federal Reserve Bank of New York reported that its Empire State business conditions index dropped to negative 7.78 this month from a revised negative 7.30 reading in December. Economists had expected manufacturing activity to improve to a reading of negative 2.0 for January, but most of the subindexes were below zero, showing that activity in the New York Fed region remains in contraction mode. 

The Labor Department's producer price index fell by 0.2% last month, seasonally adjusted, with a drop in food and energy prices leading the way. For the full year, the PPI rose by 1.3%, the smallest increase for a calendar year in four years, indicating that inflationary pressures have somewhat subsided. 

Separately, business inventories increased by 0.3% in November as many companies anticipated heavier holiday and auto sales. Meanwhile, December retail sales increased a better-than-expected 0.5%, ahead of economists' forecast of a 0.2% gain, offering more optimism that consumers will continue to spend on retail goods. 

The Dow and the S&P 500 had each lost 0.1% at midday, while the Nasdaq was 0.4% lower. 

Stocks on the Move
 Dell (DELL) shares remained elevated following Monday's late-afternoon reports that several investment firms were considering taking the tech company private. Morningstar analysts believe that any potential buyer would be attracted to Dell's higher-margin services business. Private equity firms also may be lured by the strong operating cash flows Dell generates, which could be used to pay down the additional debt that the company would take on if it were taken private. Shares were 2.1% higher at midday after a double-digit percentage-point increase on Monday. 

 Forest Laboratories (FRX) pared earlier losses but was still down by 0.3% at midday after the company reported a per-share loss of $0.58 for the third quarter, much lower than the expected loss of $0.11 per share. Forest Labs' adjusted loss was $0.21 per share. Revenue dropped to $722.7 million during the quarter from $1.21 the same time last year, and the firm also expects its full-year earnings to be at the lower end of its outlook. 

Homebuilder  Lennar (LEN) turned in a fourth-quarter profit of $124.3 million, well higher than its profit of $30.3 million posted the same time last year. Total sales improved by 42% to $1.35 billion, and earnings per share and revenue each beat Wall Street expectations. The firm's CEO said the results reflect a broad housing recovery. Shares, however, were down by 2.3% at midday. 

Foreign Markets
Stocks overseas were mixed as the FTSE 100 gained 0.2%, while the Paris CAC and the DAX lost 0.3% and 0.7%. 

In Asia, the Shanghai Composite had gained 0.6%, and the Nikkei 225 was up by 0.7%. The Hang Seng, however, fell by 0.1%.

Kevin O'Shaughnessy does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.