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Mixed earnings put brakes on stock market rally

STOCKS ended a quiet day mixed Wednesday as traders remained hesitant to push further into the market following a weeklong surge on strong earnings reports.

Yesterday's modest moves left the market's recent climb intact. The Dow Jones industrial average and the Standard & Poor's 500 index slipped less than 0.5 percent, while the Nasdaq composite index advanced.

Investors responded to uneven corporate results. Apple Inc. and Starbucks Inc. jumped after beating analysts' estimates, but chip maker Advanced Micro Devices Inc. and major bank Wells Fargo & Co. fell after reporting disappointing numbers.

By the start of trading yesterday, strong earnings reports for the April-June quarter had pushed major stock indicators up more than 8 percent in seven days. The advance restarted a rally that ran from early March through mid-June before stalling as signs of improvement in the economy started to dry up.

The latest climb has pushed the Dow up enough to erase its losses for the year and to its highest level since January. The benchmark S&P 500 index is at its highest point since November.

Analysts say it's not surprising to see the stock market slow its climb as investors raise their expectations. Of the approximately 100 companies in the S&P 500 index that had reported earnings by yesterday, 62 percent topped analysts' forecasts, according to S&P.

"As the earnings season goes on it becomes more difficult because the bar goes higher and higher," said John Canally, economist at LPL Financial in Boston.

The Dow fell 34.68, or 0.4 percent, to 8,881.26. The broader S&P 500 index slipped 0.51, or 0.1 percent, to 954.07, and the Nasdaq rose 10.18, or 0.5 percent, to 1,926.38, helped by Apple and Starbucks.

Major market indexes seesawed yesterday as they had a day earlier. Stocks pushed higher late Tuesday after Federal Reserve Chairman Ben Bernanke said the economy was recovering, though at a slow pace.

Earnings reports directed trading yesterday. Apple rose US$5.23, or 3.5 percent, to US$156.74 after robust sales of laptops and iPhones pushed its profit and revenue above what analysts had expected.

Starbucks surged US$2.70, or 18.4 percent, to US$17.39 after the coffee chain shut stores, laid off workers and cut other costs to produce fiscal third-quarter results that topped expectations.

Advanced Micro fell 53 cents, or 13 percent, to US$3.55 after its second-quarter loss narrowed less than analysts expected.

Wells Fargo reported that its earnings jumped 47 percent in part because of its acquisition of Wachovia Corp. But the company said that losses from bad loans kept rising. The stock fell 95 cents, or 3.8 percent, to US$24.40.

Analysts say worries about deteriorating credit and messy balance sheets are keeping some investors from embracing better-than-expected results from banks.

"Some of these financials reported what seemed like good numbers but it's hard to see through all the smoke with everything that's going on with the banks nowadays," said Terry L. Morris, senior equity manager at National Penn Investors Trust Co. in Wyomissing, Pa.

Bond prices fell, pushing yields higher. The yield on the benchmark 10-year Treasury note rose to 3.55 percent from 3.48 percent late Tuesday.

Advancing stocks narrowly outpaced those that fell on the New York Stock Exchange, where volume came to 1.1 billion shares compared with 1.2 billion Tuesday.

The Russell 2000 index of smaller companies rose 3.48, or 0.7 percent, to 528.70.


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