The second week of 2012 is keeping the year's hot streak alive as one macro and one company-specific news item helped propel all three major indices up along with gold and oil.
On the macro side, consumer credit expanded 10% in November, its largest monthly climb in a decade. At this point in the recovery, if consumers are tapping their credit cards then they are likely feeling more bullish about their and the overall economy's prospects. Dried-up consumer demand caused by an increased personal savings rate has been among the factors for the slow pace of recovery.
Usually company-specific news doesn't move the overall market, but when that company is a large commodity producer leading off earnings season, everyone takes notice. Alcoa (NYSE: AA) posted a wider-than-expected loss even after removing one-time items but impressed on revenue despite a 12% decrease in aluminum prices over the quarter. Alcoa's 2012 outlook was mixed, citing Europe as a weak point, but believed global demand would still rise 7% this year.
With those stories in mind, the Dow Jones Industrial Average (INDEX: ^DJI) rallied back from a brief dip into negative territory to just over a 32-point gain, leaving it up 0.27% and making it the best performer of the three indices. The S&P 500 and Nasdaq also closed up, managing 0.23% and 0.09% gains, respectively.
Inside the Dow, it was no surprise that given its relatively positive quarter, Alcoa was the Dow's biggest riser, closing up 2.89% for the day. Surging consumer credit use is always good news for banks, so it is no surprise that Bank of America (NYSE: BAC), finished in second place after rising an impressive 1.46%. Coming in third was heavy-machine maker Caterpillar (NYSE: CAT), up 1.40%, bolstered no doubt by Alcoa's commodity forecast and the increasing likelihood that a tangible recovery may be taking hold.
The best-performing stock of all belonged to the Nasdaq, as small biotech maker Inhibitex (Nasdaq: INHX) closed up 140% after accepting a buyout from Bristol-Myers Squibb. The biotech was one of last year's top performers thanks in part to the phase 1 efficacy results of its hepatitis-C drug candidate INX-189 and partially because Big Pharma was snatching up its competitors. Investors hoping Inhibitex would reach the same lucrative conclusion received their wish today.
All told, it appears the market is continuing a positive trend to kick off the year. It's worth watching with a close eye to see how the market closes this week and this month. And if January ends up, we can hope that past trends of its foreshadowing a strong annual performance remain true.
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