Erratic session for US stocks
Stocks in the United States ended an erratic session mixed today as investors weighed slightly higher oil prices against strong earnings from companies including Verizon Communications Inc and Texas Instruments Inc.
The major indexes wavered throughout the day as investors tracked fluctuations in crude oil futures, which settled at 59.12dollars a barrel, up 20 cents, on the New York Mercantile Exchange.
Rising oil prices, which could lead to lower consumer spending and declining corporate earnings, have shadowed stocks for months and distracted investors Tuesday from the current crop of upbeat earnings reports.
Wall Street also reacted strongly to any company news that strayed from expectations. Investors punished chemical maker DuPont because its sales fell below forecasts, but bid up Lockheed Martin, the biggest US defence contractor, whose forecastfor the year was above expectations.
“The market’s being very selective about who they reward and who they punish,” said Tobias Levkovich, chief US equity strategist at Citigroup. “If a company comes through and literally trounces the numbers, the stock gets a positive reaction. … If it isn’t perfect, they beat them up.”
According to preliminary calculations, the Dow Jones industrial average fell 16.71, or 0.16%, to 10,579.77.
Broader stock indicators were higher. The Standard & Poor’s 500 index rose 2.13, or 0.17%, to 1,231.16, and the Nasdaq composite index rose 9.25, or 0.43%, to 2,175.99.
Bonds were higher, with the yield on the 10-year Treasury falling to 4.23% from 4.25% late Monday.
The US dollar was up against the euro. Gold prices were flat.
The stock market isn’t reacting to solid earnings because ”there’s much more discounting of risk than there has been in the past; the risk of higher oil prices, the risk of higher interest rates,” said Hans F Olsen, managing director and chief investment officer at Bingham Legg Advisers, a private wealth management firm in Boston.
”This has been buffeting the stock market for the better part of a the year.”
Michael Strauss, chief economist at Commonfund, which manages about 34 billion dollars for non-profit institutions, said: “It doesn’t look like earnings have the huge upside surprise to catapult the market higher.
“At the same time, the earnings are there, so it’s hard to get any type of sustainable weakness either; hence, the continuation of a very narrow trading range with a slight upside bias.”
Stocks also stumbled in early trading after Chinese officials suggested last week’s revaluation of the yuan may have been an isolated step.
After the revaluation, the Chinese currency will be pegged to a basket of currency instead of being pegged solely to the dollar, but investors hope Chinese central bankers will eventually allow the yuan to float, which could make Chinese goods look like less of a bargain compared to products made in America.
Americans’ faith in the economy as measured by The Conference Board’s consumer confidence index edged lower in July following three months of gains. Lynn Franco, director of the organisation’s Consumer Research Center, said the dip, to 103.2 from June’s reading of 106.2, was “no cause for concern.”
DuPont fell 2.89dollars to 41.15dollars, although the company beat earnings forecasts. Lockheed Martin, which also beat expectations, gained 1.48dollars to 63.99dollars.
Sun Microsystems said its fiscal fourth-quarter profits were down sharply. The stock closed regular trading unchanged, at 3.85dollars, then rose 11 cents a share to 3.96dollars in extended trading.
Amazon.com also reported sharply lower earnings, but beat analysts’ estimates. Its stock, which closed regular trading down 21 cents to 37.74dollars, gained 2.48dollars to reach 40.22dollars in extended trading.
Verizon, the largest US phone company, rose 11 cents to 34.13dollars after second-quarter profit rose 19%. Earnings were boosted by the sale of its operations in Hawaii and another powerful showing for Verizon Wireless.
Black & Decker, the power tools and home improvement products maker, beat expectations with a second-quarter profit that rose 27%. But its chief financial officer said on a conference call with investors the company was seeing “more cautious order patterns by retailers” and the stock fell 1.53dollars to 90.27dollars.
BP Group, one of the world’s largest oil companies, said quarterly profits rose 29% on the strength of world oil prices, but said it was taking a 700 million dollars charge to settle claims from a refinery explosion. The stock dropped 1.38dollars to 65.50dollars.
Texas Instruments’ quarterly profit rose 42%, beating analysts’ estimates, as the semiconductor maker benefited from lower inventory levels among customers and robust demand for chips in a variety of new electronic gadgets. Its stock rose 1.70dollars to 32.30dollars.
General Motors climbed 1.09dollars to 36.96dollars after the company’s GMAC financial services unit said it will sell up to 55 billion dollars worth of car loan contracts to Bank of America over the next five years.
Advancing issues led decliners by roughly 3 to 2 on the New York Stock Exchange where volume came to 1.48 billion shares, up from 1.31 billion Monday.
The Russell 2000 index of smaller companies rose 3.59, or 0.54%, to 674.58.
