U.S. MARKET AVERAGES

Market remained under pressure as earnings warnings, ratings downgrades and spike in oil price all converged on the eleventh day of trading for the year.

Three broad averages Dow, Nasdaq and S&P closed lower after trading all day in the negative territory. After the close IBM, Yahoo and Intel are scheduled to release earnings. Analysts also downgraded Sandisk, Applied Materials, and Advanced Micro Devices on valuation concerns. Wells Fargo and Fifth Third Bancorp traded lower as both companies released earnings warnings.

Oil rose close to 2.5% at close. Oil traded higher during the day and is expected to stay near elevated prices as Iran nuclear program and attack on Nigerian oil field unnerved oil traders.

Federal Reserve reported that nation’s industrial production rose 0.6% and capacity utilization was reported at 80.7%. For the third month in a row industrial production rose. For the fourth quarter, industrial production rose at an annual rate of 3.8% and for the full year production rose at 3.2% rate.

MOVERS AND SHAKERS

Boston Scientific (BSX: chart) lifted its proposal to acquire Guidant Corp. (GDT: chart) to roughly $27 billion, or $80 a share from earlier $25 billion. Boston Scientific noted its bid represents a premium of $3.3 billion, or $9 per share, over the competing offer of Johnson & Johnson (JNJ: chart). Boston Scientific said its amended offer expires at 5:00 pm ET unless its offer is declared ‘superior’ by Guidant''s board, a condition that would move the offer''s expiration back to Jan. 25. Boston Scientific’s shares fell 4.8%. Guidant’s stock rose 7.6%.

Quanex Corp. (NX: chart), maker of engineered materials for vehicles and the construction industry, raised its Q1 earnings outlook by 35%, citing better-than-expected results. The company said it expects adjusted earnings of $1.00 to $1.05, above the average forecast for earnings of 84 cents a share. The stock climbed 12% before closing near 10%.

Furniture Brands (FBN: chart) dropped over 6% after CS First Boston downgraded the furniture seller to underperform from neutral, citing valuation and lofty expectations for margin improvement. The stock dropped 8%.

Innovex (INVX: chart) reported Q1 loss of $9.77 million, or 51 cents a share, vs. a net loss of $1.01 million, or 5 cents a share, in the year-ago period. Excluding 52 cents a share in restructuring charges, the company earned $160,000, or a penny a share on 26% revenue growth to $50.5 million from $40 million last year. Innovex said it plans to move all prototyping and high volume manufacturing to its Thailand manufacturing facility over the next 12 months. The company expects to reduce its workforce and see annual cost savings of $8 million once the transition is complete. The company’s shares slipped 9.3%.

Toll Brothers (TOL: chart) was downgraded to sell from neutral by Banc of America Securities, citing lower demand on higher prices. The stock fell 1.5%.

SanDisk Corp. (SNDK: chart) dropped 3% after it was downgraded to hold at Citirgroup but closed down 1.3%.

ECONOMIC NEWS

Tuesday morning, the Federal Reserve released its report on industrial production and capacity utilization in the month of December. The report showed that industrial production growth and the capacity utilization rate both came in slightly above economist estimates.

The Fed said that industrial production grew by 0.6 percent in December after an upwardly revised increase of 0.8 percent in November. Economists had expected industrial production to grow by 0.5 percent compared to the 0.7 percent growth originally reported for November.

The report showed that the December industrial production growth reflected a 0.2 percent increase in manufacturing output as well as a 2.7 percent increase in output from utilities and a 2.5 percent increase in output from mines.

The Fed added that industrial production rose 2.8 percent over the twelve months of 2005, rising to 109.8 percent of its 2002 average. Total industrial capacity rose 1.7 percent in 2005.

The report also showed that the capacity utilization rate rose to 80.7 percent in December from an upwardly revised 80.3 percent in November. Economists had expected the rate to increase to 80.6 percent compared to the rate of 80.2 percent previously reported for November.

INTERNATIONAL MARKETS NEWS

Asian-Pacific benchmarks finished deeply in the red Tuesday, pressured by selling of Internet-related, real estate and brokerage issues. The decline started as Japan’s authorities began a probe of Internet portal Livedoor Co. The Nikkei tumbled 2.8% to 15,805.95. South Korea’s Kospi slid 2.3%, followed by Hong Kong’s Hang Seng, down 1.4%. Shanghai Composite was the only gainer with an advance of 0.5%.

European stocks finished in the negative territory on oil prices over $65 a barrel, mixed corporate news and heavy losses in the Japanese Nikkei. The German DAX 30 slipped 1%, the French CAC 40 shed 1%, and London’s FTSE 100 fell 0.7%.