Producers like Chesapeake Energy Corp. (NYSE: CHK), Exxon Mobil Corp. (NYSE: XOM), and others support increased exports. Large consumers like Alcoa Inc. (NYSE: AA) and E.I. du Pont de Nemours & Co. (NYSE: DD) will see a sharp increase in fuel costs, and generally oppose exporting natural gas in large quantities.

According to the EIA’s summary of its full report, there are four significant impacts of increasing natural gas exports:

1. Increased natural gas exports lead to increased natural gas prices.
2. Natural gas markets in the United States balance in response to increased natural gas exports largely through increased natural gas production [from shale gas deposits].
3. The remaining portion [of increased gas production] is supplied by natural gas that would have been consumed domestically if not for the higher prices.
4. Even while consuming less, on average, consumers will see an increase in their natural gas and electricity expenditures.

It is worth noting that in point 3, the increased gas available for domestic consumption comes from fuel-switching. Electricity now generated using natural gas will be generated in coal-fired plants (mostly) and, to a lesser extent, from renewable sources.

Booming production from shale fields and expected warmer weather is sending natural gas prices lower again today, down more than -6% to $2.32/thousand cubic feet, the lowest level in 10 years.

Under any of the EIA’s scenarios, domestic natural gas prices rise, it’s just a question of how fast and how much.

Paul Ausick

The unofficial closing bells put the DJIA up nearly 70 points to 12,462.47 (0.56%), the NASDAQ rose nearly 26 points (0.97%) to 2,702.50, and the S&P 500 rose 0.89% or more than 11 points to 1,292.08.

There were several analyst upgrades and downgrades today, including Intel Corp. (NASDAQ: INTC) maintained as ‘top tech/semiconductor’ pick at Credit Suisse; Netflix Inc. (NASDAQ: NFLX) cut from ‘neutral’ to ‘underperform’ at BofA/ML; Starbucks Corp. (NASDAQ: SBUX) reiterated as ‘buy’ and estimates raised at Argus; The Walt Disney Co. (NYSE: DIS) cut to ‘equal-weight’ at Barclays; and Macy’s Inc. (NYSE: M) reiterated as ‘outperform’ and price target raised from $32 to $36 at Credit Suisse.

Earnings reports of note since markets closed yesterday include: Alcoa is up 0.27% at $9.45; Emulex Corp. (NYSE: ELX) is up more than 13% at $8.38; and BSD Medical Corp. (NASDAQ: BSDM) is down more than -7% at $2.09. After markets close today Synnex Corp. (NYSE: SNX) reports earnings and tomorrow’s earnings schedule includes Lennar Corp. (NYSE: LEN) and Supervalu Inc. (NYSE: SVU).

Other standouts from today include the following stocks:

WebMD Health Corp. (NASDAQ: WBMD) is down more than -28% at $26.41, after posting a new 52-week low of $25.01 earlier today. The web-based healthcare company’s CEO resigned, the search for an acquirer was terminated, and the revenue outlook for 2012 was lowered.

Complete Genomics Inc. (NASDAQ: GNOM) is down nearly -26% at $2.88. The biotechnology company shipped fewer genomes than expected in the fourth quarter.

Idenix Pharmaceuticals Inc. (NASDAQ: IDIX) is up more than 25% at $12.10, a new 52-week high. The drug maker continues to bask in the reflected glow of yesterday’s takeover of Inhibitex Inc. (NASDAQ: INHX) by Bristol Myers Squibb (NYSE: BMY).

Tiffany & Co. (NYSE: TIF) is down more than -10% at $59.97. The company reported weak earnings and a lower forecast this morning.

Liz Claiborne Inc. (NYSE: LIZ) is down more than -13% at $8.63. The clothing company’s CFO resigned and the company lowered 2012 revenue estimates.

Stay tuned for Wednesday. Chicago Fed President Charles Evans, Atlanta Fed President Dennis Lockhart, and Philadelphia Fed President Charles Plosser are giving speeches. Here are the noteworthy events on the schedule (all times Eastern):

• 7:00 a.m. – Mortgage Bankers Association purchase applications
• 10:30 a.m. – EIA weekly petroleum status report
• 1:00 p.m. – 10-year Treasury note auction
• 2:00 p.m. – Federal Reserve Beige Book released

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Paul Ausick

Chinese Imports Slow - China’s trade growth reached a tw0-year low in December. That puts it near to its low point in the middle of the Great Recession. The annual export growth rate was 13.4%. But the media and analysts pointed to import growth as a matter for greater concern. It was up only 11.8% year-over-year. The figure probably is a sign that China needs less raw material to feed the factory systems that engender its exports. This information, taken together with the rapid slowdown in most of the EU and Japan, is the latest sign that a new recession already has begun in certain parts of the world.

Bank of America Layoffs - Bank of America (NYSE: BAC) continued what seems like an endless period of layoffs. Many bank analysts still argue that the financial firm is in worse shape than management will admit. Rumors are that the bank will fire 20% of the managing directors in its Asia investment bank division. One reason for the action may be a slight slowing of the region’s economic activity. However, the layoffs are large enough to indicate that Bank of America’s troubles are worse than most of its competitors.

EU Drag on Earnings - Corporate signals that Europe has become a trouble spot for them continue to grow. Alcoa (NYSE: AA) released poor earnings and blamed its EU business for much of the problem. Philips, one of the largest consumer electronics and lighting firms in the world, warned on its fourth-quarter numbers. It said the moribund GDP growth in Europe was to blame. The news from the two companies will add to investors’ focus on corporate earnings as they are released over the next two months. And with those earnings will come earnings forecasts, which will signal whether the damage from the EU region’s problems will extend well into this year.

Douglas A. McIntyre

The aluminum giant reported earnings of -$0.03 EPS and $5.99 billion in revenues.  Thomson Reuters had a consensus grouping of -$0.02 EPS and $5.74 in revenues.  Keep in mind that it was just a week ago that analysts were looking for $0.03 EPS and less than 3 months ago estimates were up around $0.20 EPS or so.

The loss was $199 million for the fourth quarter and if you include items the loss came in at -$0.18 EPS.  The company blamed “restructuring charges associated with the closure and curtailment of high-cost production capacity, lower aluminum prices, and continued market weakness.”

Alcoa had already been talking down its expectations when it was talking about capacity shutdowns.

As you would expect, The company is forecasting for 2012 global aluminum demand will grow 7% and it expects a global deficit in primary aluminum supply.  That is above the 6.5% projection per year that Alcoa has said is required for the aluminum market doubling in size by 2020. It sees 600,000 metric tonnes as the deficit for the industry in 2012. Global industrial use/growth is projected by Alcoa as follows:

• aerospace (10-11 percent),
• automotive (3-8 percent),
• commercial transportation (2-5 percent),
• packaging (2-3 percent),
• and building and construction (4-5 percent) markets.

Alcoa shares closed up 2.9% at $9.43 on the day and the 52-week trading range is $8.45 to $18.47.  Today’s news could have been worse and the stock was already very week ahead of earnings. Shares were above $11 on October 31, 2011.  Shares may trade lower on this news, but that is proof that the market’s ability to price in the known events is dead.  So much for the efficient market theory you learned about in college.

Read Also: Stocks Priced for 12% Gain to DJIA 13,678

JON C. OGG

The unofficial closing bells put the DJIA up nearly 33 points to 12,392.54 (0.26%), the NASDAQ rose more than 2 points (0.09%) to 2,676.56, and the S&P 500 rose 0.23% or nearly 3 points to 1,280.70.

There were several analyst upgrades and downgrades today, including Costco Wholesale Corp. (NASDAQ: COST) cut to ‘underperform’ at Bernstein; Exxon Mobil Corp. (NYSE: XOM) reiterated as ‘buy’ at Goldman Sachs; Akamai Technologies Inc. (NASDAQ: AKAM) cut to ‘sell’ from ‘neutral’ at Citigroup; Pandora Media Inc. (NYSE: P) started as ‘buy’ at Needham; Southern Copper Co. (NYSE: SCCO) cut to ‘hold’ at Deutsche Bank; and Merck & Co. Inc. (NYSE: MRK) downgraded to ‘hold’ at Jefferies.

Earnings reports of note since markets closed Friday include: Acuity Brands Inc. (NYSE: AYI) is up nearly 9% at $54.79; and Cubist Pharmaceuticals Inc. (NASDAQ: CBST) is down -0.55% at $39.95. After markets close today bellwether Alcoa Inc. (NYSE: AA) is expected to report an EPS loss of -$0.02.

Other standouts from today include the following stocks:

Inhibitex Inc. (NASDAQ: INHX) is up more than 140% at $23.70 after posting a new 52-week high of $24.08 earlier today. The drug company has agreed to be acquired by Bristol Myers Squibb (NYSE: BMY) for $2.5 billion ($26/share in cash).

Pansoft Co. Ltd. (NASDAQ: PSOF) is up nearly 56% at $3.13. The Chinese enterprise software company received a buyout offer from Timesway Group Ltd, which is controlled by Pansoft’s chairman, for $3.76/share for the shares Timesway does not already own.

Idenix Pharmaceuticals Inc. (NASDAQ: IDIX) is up more than 36% at $9.59 after posting a new 52-week high of $10.39 earlier today. The drug maker’s hepatitis C drug got a postive report on an interim drug trial, the same categoy of drug made by Inhibitex. More coverage here.

Netflix Inc. (NASDAQ: NFLX) is up more than 14% at $98.62. The video rental and streaming company launched its streaming service in the UK and Ireland today. We have more coverage here.

Theravance Inc. (NASDAQ: THRX) is down more than -19% at $16.27. The biopharmaceutical firm reported that a new drug to treat asthma and other pulmonary diseases performed no better than an existing drug in a clinical trial.

Lantronix Inc. (NASDAQ: LTRX) is up more than 28% at $2.95. The networking products maker launched new wireless printing products aimed at devices that use the iOS operating system software from Apple Inc. (NASDAQ: AAPL).

Stay tuned for Tuesday. San Francisco Fed President John Williams and Kansas City Fed President Esther George are giving speeches. Here are the noteworthy events on the schedule (all times Eastern):

• 7:30 a.m. – NFIB small business optimism index
• 11:30 a.m. – 4- and 52-week Treasury bill auctions
• 1:00 p.m. – 3-year Treasury note auction

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At about 8:30 a.m. ET, Germany’s DAX is down -0.19% at 6,046.16 and France’s CAC 40 is up 0.22%, at 3,144.20. In London, the FTSE 100 is down -0.21%, at 5,637.88.

In Asia, Hong Kong’s Hang Seng closed up 1.47%, at 18,865.70. The Nikkei index closed down -1.16%, at 8,390.35 on Friday and closed for a holiday on Monday, and the Shanghai index closed up 2.89%, at 2,225.89.

Dow futures are up 0.25%, at 12,340.00. The Nasdaq 100 is up 0.30%, at 2,359.25 and the S&P is up 0.21%, at 1,276.70.

In the currency markets, the US dollar is weaker against the euro, the British pound, and the Japanese yen. The US dollar index is down about 0.22% at 81.084.

In commodities, WTI and Brent crude are mixed this morning, with WTI at up slightly at $101.58/barrel and Brent down slightly at $112.96/barrel. Gold is also higher this morning, at $1,618.50/ounce.

At about 8:15 a.m. ET, Germany’s DAX is up 0.33% at 6,115.94 and France’s CAC 40 is up 0.69%, at 3,166.57. In London, the FTSE 100 is up 0.55%, at 5,654.94.

In Asia, Hong Kong’s Hang Seng closed down -1.17%, at 18,593.10. The Nikkei index closed down -1.16%, at 8,390.35, and the Shanghai index closed up 0.7%, at 2,163.40

Dow futures are up 0.17%, at 12,352.00. The Nasdaq 100 is up 0.15%, at 2,343.00 and the S&P is up 0.19%, at 1,275.50.

In the currency markets, the US dollar is stronger against the euro, the British pound, and the Japanese yen. The US dollar index is up about 0.075% at 80.982.

In commodities, both WTI and Brent crude are higher this morning, with WTI at $102.17/barrel and Brent at $112.84/barrel. Gold is also higher this morning, at $1,623.70/ounce.

The International Monetary Fund’s Lagarde says 2012 will not see the end of the euro. (Reuters)

MF Global’s trustee will not hand over some documents about the collapsed firm to regulators. (Reuters)

Samsung’s profits in Q4 are driven up by handset sales. (Reuters)

General Motors (NYSE: GM) to reinforce Volt battery casings. (Reuters)

Toyota (NYSE: TM) to target 10% growth in China this year. (Reuters)

George Soros says a breakup of the euro would be a disaster. (Reuters)

LG says it set a partnership with Google (NASDAQ: GOOG) to launch Google TV. (Reuters)

Use of Siri causes the new iPhone to double its data consumption. (Reuters)

Yahoo! (NASDAQ: YHOO) will decide whether to engineer a spin-out that may save it $4 billion in taxes. (WSJ)

The U.S. office market slightly improves in Q4. (WSJ)

BMW is the top luxury car company in America, based on 2011 sales. (WSJ)

The military will downsize considerably under a new Obama plan. (WSJ)

California Governor Jerry Brown hopes to close a $9.2 billion budget gap with cuts to social services. (WSJ)

A recession in Europe raises more worries that its finances will become a larger problem. (WSJ)

Alcoa (NYSE: AA) will close some aluminum-smelting capacity because of slow demand. (WSJ)

Boeing (NYSE: BA) lags Airbus in 2011 sales. (WSJ)

Shares soar after Dendreon (NASDAQ: DNDN) says its made advances in development of its Provenge prostate-cancer. (WSJ)

China will curtail plans that help foreign car makers in order to help locals. (WSJ)

PC firm Lenovo will reset how it is organized geographically. (WSJ)

The IMF may set stress tests for Japan’s banks (WSJ)

Financial firms will sell $12 billion in bonds this week. (WSJ)

The top 1% of mobile users consumer half of all bandwidth. (NYT)

Holders of U.S. mortgage bonds may report large losses as banks settle mortgage paper charges with the government. (FT)

HTC sees its first profit drop in two years. (Bloomberg)

Audi plans to increase sales substantially in the U.S. (Bloomberg)

Douglas A. McIntyre

Of the DJIA components, the five with the most implied upside were Alcoa, Inc. (NYSE: AA), Bank of America Corporation (NYSE: BAC), Caterpillar Inc. (NYSE: CAT), J.P. Morgan Chase & Co. (NYSE: JPM), and United Technologies Corporation (NYSE: UTX). If the model is right on the near-12% gains, then the peak on the SPDR Dow Jones Industrial Average (NYSE: DIA) would be roughly $136.47 assuming that the ETF tracks the index tick by tick. Remember, that “cheapest” does not always mean that these stocks will go much just higher just because an analyst thinks so.  There is a saying that “cheap stocks usually get cheaper.”

Alcoa, Inc. (NYSE: AA) closed out 2011 at $8.65, leaving an implied price target gain of 44.2% to the $12.48 consensus price target.  Alcoa’s game is simple and that is that it has to still maintain that the aluminum market can double by the year 2020.  Shares were brutalized last year as the 52-week range was $8.45 to $18.47.  It is hard to imagine that this was a $30 stock and higher before the recession.

Bank of America Corporation (NYSE: BAC) is of course the “most upside” stock because it was the worst performing DJIA stock of 2011.  It lost more than half of its value.  At $5.56, it has an implied upside of what is truly unbelievable at 72.3% to the $9.58 target.  This frankly sounds too good to be true even if Warren Buffett tried to prop it up.  The problems are almost too great to bother naming here at BofA.

Caterpillar Inc. (NYSE: CAT) is heavily dependent on emerging markets for mining and infrastructure, so it is of course highly cyclical.  The 2011 close-out price of $90.60 compared to a 52-week range of $67.54 to $116.55.  The consensus Thomson Reuters price targets of $114.50 implies an upside of 26.3% and the dividend is about 2%.  As go the emerging economies, as goes Cat!

Read Also: Is Apple Still Great for 2012?

J.P. Morgan Chase & Co. (NYSE: JPM) is hard to argue against for a management team, but it is in the battered banking sector.  This now trades well under book value and the sector is its anchor.  If the sector improves, investors will probably seek safety behind Jamie Dimon.  At $33.25, there is an implied upside of 39.3% to the $46.33 price target from Thomson Reuters.  Keep in mind that the 52-week trading range is $27.85 to $48.36 so even the leader is down by a third of its value.

United Technologies Corporation (NYSE: UTX) was a bit surprising to see on the list as the conglomerate was shown to have 21.5% upside from the current $73.09 price to a target of $88.79.  That would still not even be a year high, as the range of the last year was $66.87 to $91.83.

These were meant to just be some of the caveats and expectations for the 5 DJIA components with the most implied upside of the 30 components making up the index.  As we noted with out implied 13,678 peak value in the DJIA for 2012, it almost sounds too good to be true.

There is something to consider, and it may be serious.  What happens when you question your own numbers that a model generates?

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JON C. OGG

In 2010, the methodology called for a target of 11,455 and the DJIA closed out at 11,577.51 for the year. In 2011, the methodology called for a blended peak consensus of 13,042.06. While the DJIA closed 2011 up 5.5% at 12,217.56 for the year, the peak 2011 DJIA price was 12,928.50. Using stock market projections often feels like a game of horseshoes, or a bit like throwing hand grenades, because being close enough is generally all that matters. The blended DJIA price target peak for 2012, using the 24/7 Wall St. methodology is 13,678, or a gain of 11.96%.

Amazingly enough, this year’s projected figure may actually be understated because this removes the wild card performances of Bank of America Corporation (NYSE: BAC) and J.P. Morgan Chase & Co. (NYSE: JPM). Bank analysts have price targets that are still much higher than current prices and these have a low weighting in the actual share price weighting of the DJIA methodology. For that reason, the 13,678 is based upon 28 components. If we included the target using our methodology with just J.P. Morgan Chase & Co. (NYSE: JPM) shares, we would get an expected gain of 12.9% to 13,793; but if we also include the large upside targets to Bank of America Corporation (NYSE: BAC), then the DJIA target would be 14,035 for a gain of 14.88%.

There are caveats that have to be considered, particularly for a projected gain of almost 12% in 2012. The first is that analysts as a group are often too bullish, and the second is that this is intended to represent a peak level of 2012 rather than a year-end call. Only one of the 30 DJIA components, Verizon Communications Inc. (NYSE: VZ), is trading above its consensus price target from Thomson Reuters due to fresh highs in the stock. Many DJIA stocks closed well under their 52-week highs, but most consensus price targets on the 30 DJIA components would actually hit new 52-week highs in 2012 if the analysts are correct. A solid fourth quarter for U.S. stocks is part of why the analysts are still excited on individual stocks in 2012.

2011 was a very volatile year. The United States lost its prized Triple-A rating by S&P, emerging markets cooled off, the European Union went into meltdown mode, and all the while the big American companies managed to grow earnings, buy back stock at a feverish pace and even managed to grow their dividends. The last quarter for the DJIA was actually up about 12% versus 5.5% for the year. The broader market of the S&P 500 was up 11% in the fourth quarter but managed to close out the year literally 0.04 points lower than a year earlier.

The best of the 30 DJIA stocks was McDonald’s Corporation (NYSE: MCD) with a gain of about 31%. It rose so much that analysts now only see about 3% upside, based on year-end price target objectives. The three highest price components helped the DJIA gain as follows: International Business Machines Corporation (NYSE: IBM) rose about 27%, Chevron Corporation (NYSE: CVX) rose almost 20%, and McDonald’s Corporation (NYSE: MCD) rose over 30%. Warren Buffett even bought about $10 billion worth of IBM shares.

There were also many big losers out of the 30 DJIA components. A 58% drop in Bank of America Corporation (NYSE: BAC) shares made it the worst performer of the 30 DJIA stocks. Other big losers were Alcoa, Inc. (NYSE: AA) at -43%, Hewlett-Packard Co. (NYSE: HPQ) at -38%, and even J.P. Morgan Chase & Co. (NYSE: JPM) was dragged lower by almost 20% as the bank stocks slid. A couple of key components were barely changed. General Electric Co. (NYSE: GE) managed a small gain of almost 1.4% and Caterpillar Inc. (NYSE: CAT) closed down 1.5%.

The DJIA projection methodology has come within about 1% in each of the past two years. Does it seem too good to be true for 2012? With how sensitive the economy is today, it feels like it may be too good to be true. 2011 was so volatile and the DJIA performance of 5.5% compared to basically a total wash on the S&P 500 performance. Is it fair to question a methodology that worked for the past two years? If the DJIA hits 13,678 in 2012, that would compare to a high of 12,928.50 over the past year.

There are at least some things that could drive such a bullish projection. 2012 is an election year and that has often helped stocks. Will the gridlock of today interrupt 2012? The recession is now two and a half years in the rear-view mirror. The problems at the end of 2011 are likely to act as continued headwinds in 2012. Europe is still on the border of crisis. China is not posting the blazing growth needed to drive mature economies. Many segments of the manufacturing sector have excess capacity and moderate demand. Still, traditional valuations of stocks today are very low by historic standards. Companies are still raising dividends and still repurchasing stocks.

The Dogs of the Dow have a yield of roughly 4% for 2012. The 10-Year Treasury yield closed out 2011 at only 1.87% and the 30-Year Treasury Bond closed out 2011 with a yield of only 2.89%. After a rough glance, it looks like 24 of the 30 DJIA stocks have a higher yield than the 10-Year Treasury Note, and 13 of 30 even outyield the 30-Year Treasury Bond. This sets up a scenario where income-oriented and yield-hungry investors may use the DJIA and other established dividend players as competition for income rather than buying Treasuries.

Will Ben Bernanke’s promise to keep interest rates exceptionally low through mid-2013 hold true? Even if it does hold true, by the end of 2012 that promise will have only six months or so left to it. Are not markets supposed to be price exploration mechanisms for the months and year ahead?

Of the other 30 DJIA stocks, there are some good things to look forward to and some headwinds at the same time. Cisco Systems, Inc. (NASDAQ: CSCO) is trying to turn itself around. Intel Corporation (NASDAQ: INTC) recently gave a big revenue warning, and that may hold back more interest in Microsoft Corporation (NASDAQ: MSFT). Pfizer Inc. (NYSE: PFE) and Merck & Co. (NYSE: MRK) both made good gains in 2011 despite a patent expiration cliff and less-than-exciting drug pipelines. And Wal-Mart Stores Inc. (NYSE: WMT) is entering 2012 after a near 14% gain and is acting like it wants to surge to new multiyear highs.

If the implied gains of almost 12% do somehow manage to come true in 2012, the implied peak target on the SPDR Dow Jones Industrial Average (NYSE: DIA) would be roughly $136.47, if the performance of the ETF matches the index performance tick for tick.