U.S. Stocks Turn Mixed On Post-rally Consolidation

NEW YORK (MarketWatch) -- U.S. stocks were mixed on Thursday, as investors consolidated gains in the wake of a rally that propelled the Dow Jones Industrial Average above 13,000, even as blowout earnings from Apple Inc. and upbeat results from the likes of 3M Corp. and Ford Motor Co. continued to lift sentiment.

"We've been on a six-week roll here," said Art Hogan, chief market strategist at Jefferies & Co. "But at some point, we have to take a breather to assess how far we've come and how fast."

The Dow Jones Industrial Average was up 8 points at 13,098, as 16 of its 30 components fell back. It earlier reached a new intraday record high of 13,122.

Among Dow components, 3M Corp. led the gains, jumping 4% after its earnings topped forecasts and Prudential Securities upgraded the stock.

General Motors Corp. rose 2.7%. Rival U.S. automaker Ford Motor Co. jumped 4% after posting a much smaller loss than analysts expected.

A drop in crude oil prices also helped U.S. automakers, whose shares have previously suffered from surging gasoline prices. In recent action, crude oil was down 12 cents to $65.72 a barrel.

But in the broad market, the S&P 500 index lost 1.6 points to 1,493. The Nasdaq Composite rose 3.3 points to 2,551.

Dow at 13,000

Thursday's session follows a rally on Wednesday, which saw the Dow finish above the 13,000 level for the first time, boosted by surging profits at Amazon.com .

"Earning are coming in much better than expected and the market is feeling pretty positive on this news," said Robert Pavlik, chief investment officer at Oaktree Asset Management.

Continuing the trend, Apple earnings flew past expectations, with an 88% profit rise on booming iPod sales as well as the company's line of Mac computers. Its shares surged 4.8%.

But the market's rally may be running out of steam, according to Eliot Spar, analyst at Ryan Beck & Co. Even as the Dow jumped ahead Wednesday, he noted that gaining shares on the Nasdaq beat decliners by a narrow margin of less than 3 to 2.

"There are other divergences that I saw which leads me to believe we going to run out of steam and have a minor dip," he wrote in a note.

On Thursday, trading volumes showed 772 million shares exchanging hands on the New York Stock Exchange and 1.1 billion trading on the Nasdaq stock market. Declining issues topped gainers by 18 to 13 on the NYSE and by 4 to 3 on the Nasdaq.

By sector, technology , telecoms and airlines led the gains, while metals miners , transportation and banks fell.

Technology shares, already buoyed by Apple results, received a further lift from Xilinx , which rose 3.3%, after the chip maker posted better-than-forecast results.

And Qualcom Inc. gained 1.5%. Its second-quarter profit rose 22% on higher sales of cell phone chips that use the company's technology. The firm also raised its full-year forecast for sales and profit.

Microsoft also rose 0.5% ahead of its results after the close.

But metals mining stocks took a tumble as gold prices fell sharply. And Newmont Mining Corp. fell 3.6% after its first-quarter profit fell sharply and was below analysts expectations, weighed down by higher costs and adverse foreign exchange effects.

Gold futures dropped $11.20 to $676.20 an ounce, amid a rebound in the dollar. The rebound lifted the dollar against the yen and especially against the euro, which has approached all-time highs against the U.S. currency.

Later in the session, Federal Reserve board member Frederic Mishkin is due to talk, as well as non-voting Fed member Richard Fisher.

Dow 13,000, what's next?

After a better-than-expected earnings season, investors are on the look-out for catalysts to continue taking the market higher.

Most participant already expect the economy to be slowing down -- along with earnings growth -- but there are divergences aout whether this trend is appropriately priced into stocks.

"We still have a full week of earnings but we'll start looking for additional catalysts," said Jefferies' Hogan. "People will want to know what [valuations] look like post earnings, to see whether the market is fairly priced, underpriced, or overpriced."

Earnings growth for the latest quarter is somewhere north of 6% year-on-year, roughly double what analysts were expecting coming into earnings season, according to Thomson Financial.

But the market's "expectations for both earnings and economic data were unrealistically low, as people were pricing in a worst-case scenario about subprime mortgages and slowing growth in China," Hogan said.

In late February, the market stumbled amid concerns that the meltdown in the subprime mortgage market might further pressure the housing market and lead the rest of the economy to a hard landing.

Yet, with expectations about the housing market already lowered, even the sharply lower results of homebuilders were celebrated on Thursday.

The Philadelphia housing sector index gained 1.6%. Beazer Homes USA Inc. gained 5% even after warning that "it has yet to see any meaningful evidence of a sustainable recovery in the housing market" and withdrawing its outlook for the year.

Likewise, Ryland Group Inc. rose 2.8% after saying that it swung to a loss in the first quarter, that it does not expect to meet its prior earnings guidance and couldn't provide new forecasts.

Pulte Homes Inc. rose 4% after its quarterly loss was less than analysts expected.

By Nick Godt