Stocks Higher In Volatile Trade Amid Fresh Credit Jitters
NEW YORK (MarketWatch) - U.S. stocks resumed an initial climb Wednesday as worries about deal-financing added more volatility into a market largely focused on optimistic profit reports from Boeing and Amazon.com Inc.
Word that Wall Street firms could not raise the capital from debt markets to finance the $12 billion leveraged buyout of Chrysler Corp. by Cerberus Capital Management L.P., along with news of weaker-than-expected existing homes sales in July, fueled current nervousness about credit markets.
But "on the whole, there is more good news than bad news today," said Art Hogan, chief market strategist at Jefferies & Co.
The Dow Jones Industrial Average was up 30 points at 13,747, with 18 of its 30 stocks on the rise, led by Boeing , which reported a better-than-expected second-quarter. Shares of Boeing gained 3.1%.
The broad S&P 500 index rose 3.2 points to 1,514, while the Nasdaq Composite advanced 2.6 points to 2,642.
"There is a limit to how much positive spill over you can get from Amazon," said Elliot Spar, option market strategist at Ryan Beck & Co. "The banks and brokers have to make a stand soon, or we will be subject to another round of selling."
No credit for banks
Financials had led the early rebound, with the broad sector pulling ahead. But the delay of the Chrysler deal shaved off some of the early gains, including for Dow- components JP Morgan Chase & Co. and Citigroup Inc. , two banks involved in the deal.
Citigroup was off 0.3%, while Morgan Chase fell almost 0.7%.
Broker-dealers remained slightly higher, led by the likes of Goldman Sachs and Lehman Brothers Inc. .
Banks also made headway. Wells Fargo added 0.8% and Wachovia gained 0.2%. PNC Financial Services Group Inc. climbed 0.2%. The Pittsburgh bank holding company agreed to buy Sterling Financial Corp. for $565 million.
On the New York Stock Exchange, 0-0 shares traded hands, while nearly 1.2 billion were exchanged on the Nasdaq. Declining issues edged ahead of advancers 2-1 on the NYSE and by 9-5 on the Nasdaq.
Shares of Dow component Merck & Co. Inc. climbed 3.1% after the pharmaceutical company said it would acquire another drug company, NovaCardia Inc., for $350 million in stock.
The Dow industrials on Tuesday shed 226 points after worse-than-expected DuPont results. There also were concerns about the financial sector in the wake of a warning from Countrywide Financial and growing bad debts at American Express.
On Wednesday the market will remain trained on credit market problems, earnings news, housing data and the Federal Reserve's latest survey of regional economies.
"Some earnings results are lifting the market," said Peter Cardillo, chief market analyst at Avalon Partners. "But the market is worried that subprime problems will spill over into the prime market. There is some evidence that this is happening, but not that much."
Housing, Fed data
The market displayed little reaction to a report showing U.S. sales of existing homes fell more than forecast in June.
Earlier the Mortgage Bankers Association said its index fell 3.6% for the week ended Jul-20 in data released earlier, along with a 5.0% drop in the purchase index and a 1.4% decline in the refinancing index.
The Fed's Beige Book will be released at 2 p.m. Eastern.
The Earnings Parade
Shares of online retailer Amazon.com soared 17% after a late Tuesday report had earnings more than tripling those booked a year before and 35% revenue growth. The company also received upgrades from Bear Stearns and Lehman Brothers.
Boeing Co. reported that its second-quarter net income rose to $1.1 billion, or $1.35 a share, from a loss of $160 million, or 21 cents a share in the year-ago period. The aerospace giant said revenue jumped 14% to $17 billion. The company's earnings beat expectations.
Xerox Corp. reported in a Seurities and Exchange Commission filing that its quarterly earnings and revenue were a shade above expectations. It also upped is earnings outlook for the year.
Pharmaceutical company GlaxoSmithKline plc. reported earnings and revenue that did not meet analysts' expectations. The company softened the bad news by unveiling a new $25 billion buyback.
Colgate-Palmolive Co. reported a 47% jump in quarterly results and in-line earnings per share.
Corporate news
Wells Fargo & Co. plans to boost its quarterly dividend 11% to 31 cents a share.
Reynolds American Inc. also will raise its dividend. It plays a 13% increase to 85 cents a share.
Other markets
Treasury price losses lightened Wednesday, after the National Association of Realtors reported the weakest existing homes sales in nearly five years for June. The benchmark 10-year note fell 1/32 at 96-24/32 with a yield of 4.923%.
The dollar rose to a two-week high against the euro and gained against the yen early Wednesday, rebounding from multi-year lows it touched in the previous session. "Profit taking was the theme of the day," said Boris Schlossberg, senior currency strategist at DailyFX.com. "
In New York trading, the euro stood at $1.3714, compared with $1.3813 late Tuesday, after dropping to $1.3707, the weakest since July 10. The single currency hit an all-time high of $1.3851 Tuesday. The dollar was quoted at 120.40 yen, compared with 120.60 yen.
The front month crude contract last was up 74 cents at $74.30 a barrel after the Energy Department reported crude supplies fell for a third week in a row.
Gold futures fell as much as $13 an ounce as the U.S. dollar recovered a bit from its recent string of record lows.
By Kate Gibson