U.S. Stocks Mixed Amid Earnings Deluge
NEW YORK (MarketWatch) -- U.S. stocks rose on Tuesday, sending the Dow Jones Industrial Average in record territory, as investors welcomed upbeat economic data and earnings from Coca-Cola Co. and Johnson & Johnson but cautiously waited for key earnings in the technology sector.
"Stocks are trading broadly higher, but trading in the tech sector is cautious ahead of earnings reports from Intel, Yahoo, and IBM, due out after the closing bell," said Frederic Ruffy, analyst at Optionetrics.
The Dow industrials was up 56 points at 12,776, with 19 of its 30 components advancing. The Dow earlier topped its all-time closing high of 12,786 and approached its all-time intraday high of 12,795.
The blue-chip average was lifted by a 2.6% gain in the shares of Coca Cola and a 2.6% advance for Johnson & Johnson .
Before the open, better-than-expected economic data on consumer prices and housing helped soothe market concerns over inflation and a slowing economy.
But with the stock market now having made up most of its losses since its sharp downturn in late February - and with the Dow industrials in record territory -- investors are now looking for earnings and outlooks to provide direction.
"The combination of slower economic growth and weaker corporate profits tells us that we are likely to see continued choppiness in trading levels, and additional corrective action is not out of the question," said Bob Doll, global chief investment officer at Blackrock, Inc., in a note.
The S&P 500 was up 3.2 points at 1,471, while the Nasdaq Composite fell 1.2 points to 2,517.
In the broad market for equities, trading volumes showed 1.3 billion shares exchanging hands on the New York Stock Exchange and 1.7 billion on the Nasdaq stock market. Declining issues outpaced gainers by 16 to 15 on the NYSE and by 4 to 3 on the Nasdaq.
The Nasdaq was weighed down by a 8.3% drop in the shares of TD Ameritrade , whose first-quarter earnings fell below expectations, while the online broker also lowered its outlook. Also, Charles Schwab Corp. fell 2% after its results.
Broker/dealers were among falling sectors Tuesday, along with broad financials and semiconductors . Meanwhile, utilities , real estate investment trusts and consumer stocks led the gains.
The broad technology sector remained supported ahead of key earnings from the likes of International Business Machines Corp. , Intel Corp. and Yahoo Inc. , all due to report after the close.
And banking stocks advanced after upbeat earnings from Wells Fargo & Co. and Mellon Financial Corp. . But Key Corp. fell 5.6% after its results.
On Monday stocks staged a vigorous rally, with the Dow Jones industrials rising by more than 100 points, in the wake of upbeat earnings from Citigroup Inc. and a $25 billion leveraged buyout of Sallie Mae parent company SLM Corp. .
Investors on Tuesday continued to mull earnings news and data.
"Core rate CPI was better than expected," said Peter Cardillo, chief market analyst at Avalon Partners. "But it has advanced somewhat in the past year and is somewhat above the Federal Reserve's comfort zone."
"The market is going to trade higher and it is going to focus on earnings," he said. "However, I also believe we are approaching market levels that are not sustainable, due to inflation pressures that are starting to creep in not only in the States but abroad."
The pound sterling rose to a 15-year high against the dollar on unexpectedly brisk U.K. inflation data. The dollar, meanwhile, continued to fall as the latest U.S. inflation data somewhat reduced expectations that the Fed will keep interest rates high.
Weak dollar
Recent dollar weakness is sparking concern about the value of U.S. investments.
"The Dollar Index declined 1.0% [last week] begging the question, 'did stocks really rally, or did the measuring stick -- aka; the U.S. ollar - decline'," said Jeffrey Saut, market strategist at Raymond James.
While a falling dollar normally bodes well for gold, the precious metal edged lower on Tuesday after hitting a seven-week high near $695 an ounce on Monday.
Gold fell $1.40 to close at $692.50 an ounce, pressuring the likes of Gold Fields Ltd. , Randgold Resources and Meridian Gold Inc. .
But copper prices rallied, with concerns over potential supply disruptions from Freeport-McMoRan Copper & Gold's Grasberg mine in Indonesia lifting prices to their highest level ever in New York.
Crude-oil prices, pressured by expectations for another rise in U.S. crude supplies as refinery restarts helped to calm the market's nerves over gasoline supplies. Crude oil for May delivery fell 51 cents to $63.10 a barrel.
Economy on backburner
"Although the Federal Reserve does not appear inclined to make any interest rate changes at present, we do believe that as evidence of slowing economic growth continues to mount, the central bank will begin cutting rates in the second half of the year, which would be a further benefit to stocks," said Blackrock's Doll.
The consumer price index rose 0.6% in March, while the core CPI, which excludes food and energy, gained 0.1%. Economists were expecting the headline CPI to rise 0.7% and the core CPI to advance 0.2%.
Also, industrial production continued to show a weak picture of the economy, falling 0.2% in March. Capacity utilization - a key gauge of inflationary pressures - fell to 81.4% from a revised 81.6%. Both figures were weaker than forecasts.
Treasurys benefited from the tame readings on inflation. The benchmark 10-year note gained 12/32 to 99-18/32 with a yield of 4.686%.
Meanwhile, housing starts unexpectedly rose in March, boosted by warmer weather. Construction of new homes rose 0.8% in March to a seasonally adjusted annual rate of 1.518 million. Building permits also rose to 1.544 million.
Economists surveyed by MarketWatch on average expected 1.50 million housing starts and 1.52 million permits.
The numbers helped lift the stocks of homebuilders, such as Toll Brothers Inc. , KB Home and Hovnanian Enterprises Inc. .
But the March housing number did little to reverse expectations of more downside in housing. "The March uptick is a bit of a surprise, but the trend is still clearly downwards and we expect a renewed softening in April," said Ian Shepherdson, chief U.S. economist at High Frequency Economics, in a note.
"With a huge inventory overhang, there is no reason for homebuilders yet to do anything but cut back further," he said.
By Nick Godt