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Wan LixinOpinion deputy editor of Shanghai Daily
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Stocks end flat on mixed economic data, earnings
Source: Agencies |
July 29, 2009, Wednesday
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Online Edition
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STOCKS ended little changed yesterday as a key barometer of consumer confidence and a handful of disappointing earnings reports brought reminders that an economic recovery this year is far from assured. The Dow slipped 12 points but the Nasdaq composite index posted a modest gain.
Major indexes held to a tight range for the third straight day. Investors remain cautious but still aren't willing to give up on a rally that has propelled stocks up 11 percent in little more than two weeks.
Corporate earnings reports, which beat relatively meager expectations earlier this month, disappointed on yesterday and showed that many people remain unwilling or unable to spend. Office Depot Inc. and handbag maker Coach Inc. both had trouble drawing in customers during the second quarter.
The unease grew after the Conference Board's consumer confidence index fell more than expected, fanning worries that bleak expectations among consumers and rising unemployment would hamper the economy's ability to rebound from the longest recession since World War II.
If consumers don't step up spending, companies will find it hard to boost revenue. The recent string of stronger corporate profits have come from deep cost-cutting, which can only be used to lift earnings for so long. Companies need to start showing they're bringing in more sales and revenue.
The third upbeat reading on the housing market since last week and dealmaking in the technology industry helped temper the market's disappointment.
Even without the latest worries about consumers, analysts have been anticipating some pause in buying after this month's surge, which restarted a massive rally that began in March. The advance fizzled in mid-June on lackluster economic reports.
John Merrill, chief investment officer of Tanglewood Wealth Management in Houston, said some institutional investors are being forced to pour money into stocks to try to keep pace with a 44.8 percent rally in the S&P 500 index since March 9.
"That kind of gives a nice give and take with nobody motivated to strongly sell and nobody strong motivated to strongly buy," he said.
The Dow slipped 11.79, or 0.1 percent, to 9,096.72 after being down as much as 101 points. The broader Standard & Poor's 500 index fell 2.56, or 0.3 percent, to 979.62. The Nasdaq composite index rose 7.62, or 0.4 percent, to 1,975.51 after several technology companies announced acquisitions.
Falling stocks narrowly outpaced those that rose on the New York Stock Exchange, where volume came to 1.2 billion shares, compared with 1 billion Monday.
Bond prices were mixed after a Treasury Department auction of two-year notes generated lackluster demand. The yield on the two-year note, which moves opposite its price, rose to 1.09 percent from 1.05 percent late Monday. The yield on the benchmark 10-year Treasury note fell to 3.69 percent from 3.73 percent.
Investors are anxious about government debt auctions because if demand falters Washington could have to entice buyers with higher interest rates. That could hurt an economic rebound by increasing borrowing costs for consumers on mortgages and car loans.
On Monday, stocks posted small gains after investors grappled with mixed earnings and economic reports. The market also logged a modest advance Friday.
Even with the selling yesterday the stock market's rally appears intact. That is a sign that even many cautious investors aren't willing to pull out of stocks for fear of missing another leg of the rally.
"There is uncertainty about how fast the rally can go and how far it can go," said Robert Phillips, a managing director at Spectrum Management Group of Raymond James & Associates.
Office Depot said consumers and small businesses continued to pare spending, especially on pricier items like furniture and computers. The office-supply chain tumbled 97 cents, or 18.1 percent, to US$4.38.
Coach fell 38 cents to US$28.05 after the company reported that earnings dropped 32 percent.
Not all corporate news was downbeat. Textron Inc. jumped US$1.96, or 17.6 percent, to US$13.11 after the maker of Cessna planes and Bell helicopters posted a profit excluding charges. Analysts had expected a loss.
Investors welcomed dealmaking in the tech industry. IBM Corp. agreed to acquire software maker SPSS Inc. for US$1.2 billion. SPSS jumped US$14.36, or 40.9 percent, to US$49.45, while IBM fell 35 cents to US$117.28.
Sprint Nextel Corp. intensified its focus on the market for prepaid cell phone service by announcing a US$483 million deal to buy Virgin Mobile USA Inc. Virgin Mobile rose US$1.07, or 25.4 percent, to US$5.28 and Sprint edged up 4 cents to US$4.59.
The Russell 2000 index of smaller companies rose 1.07, or 0.2 percent, to 551.95.
Major indexes held to a tight range for the third straight day. Investors remain cautious but still aren't willing to give up on a rally that has propelled stocks up 11 percent in little more than two weeks.
Corporate earnings reports, which beat relatively meager expectations earlier this month, disappointed on yesterday and showed that many people remain unwilling or unable to spend. Office Depot Inc. and handbag maker Coach Inc. both had trouble drawing in customers during the second quarter.
The unease grew after the Conference Board's consumer confidence index fell more than expected, fanning worries that bleak expectations among consumers and rising unemployment would hamper the economy's ability to rebound from the longest recession since World War II.
If consumers don't step up spending, companies will find it hard to boost revenue. The recent string of stronger corporate profits have come from deep cost-cutting, which can only be used to lift earnings for so long. Companies need to start showing they're bringing in more sales and revenue.
The third upbeat reading on the housing market since last week and dealmaking in the technology industry helped temper the market's disappointment.
Even without the latest worries about consumers, analysts have been anticipating some pause in buying after this month's surge, which restarted a massive rally that began in March. The advance fizzled in mid-June on lackluster economic reports.
John Merrill, chief investment officer of Tanglewood Wealth Management in Houston, said some institutional investors are being forced to pour money into stocks to try to keep pace with a 44.8 percent rally in the S&P 500 index since March 9.
"That kind of gives a nice give and take with nobody motivated to strongly sell and nobody strong motivated to strongly buy," he said.
The Dow slipped 11.79, or 0.1 percent, to 9,096.72 after being down as much as 101 points. The broader Standard & Poor's 500 index fell 2.56, or 0.3 percent, to 979.62. The Nasdaq composite index rose 7.62, or 0.4 percent, to 1,975.51 after several technology companies announced acquisitions.
Falling stocks narrowly outpaced those that rose on the New York Stock Exchange, where volume came to 1.2 billion shares, compared with 1 billion Monday.
Bond prices were mixed after a Treasury Department auction of two-year notes generated lackluster demand. The yield on the two-year note, which moves opposite its price, rose to 1.09 percent from 1.05 percent late Monday. The yield on the benchmark 10-year Treasury note fell to 3.69 percent from 3.73 percent.
Investors are anxious about government debt auctions because if demand falters Washington could have to entice buyers with higher interest rates. That could hurt an economic rebound by increasing borrowing costs for consumers on mortgages and car loans.
On Monday, stocks posted small gains after investors grappled with mixed earnings and economic reports. The market also logged a modest advance Friday.
Even with the selling yesterday the stock market's rally appears intact. That is a sign that even many cautious investors aren't willing to pull out of stocks for fear of missing another leg of the rally.
"There is uncertainty about how fast the rally can go and how far it can go," said Robert Phillips, a managing director at Spectrum Management Group of Raymond James & Associates.
Office Depot said consumers and small businesses continued to pare spending, especially on pricier items like furniture and computers. The office-supply chain tumbled 97 cents, or 18.1 percent, to US$4.38.
Coach fell 38 cents to US$28.05 after the company reported that earnings dropped 32 percent.
Not all corporate news was downbeat. Textron Inc. jumped US$1.96, or 17.6 percent, to US$13.11 after the maker of Cessna planes and Bell helicopters posted a profit excluding charges. Analysts had expected a loss.
Investors welcomed dealmaking in the tech industry. IBM Corp. agreed to acquire software maker SPSS Inc. for US$1.2 billion. SPSS jumped US$14.36, or 40.9 percent, to US$49.45, while IBM fell 35 cents to US$117.28.
Sprint Nextel Corp. intensified its focus on the market for prepaid cell phone service by announcing a US$483 million deal to buy Virgin Mobile USA Inc. Virgin Mobile rose US$1.07, or 25.4 percent, to US$5.28 and Sprint edged up 4 cents to US$4.59.
The Russell 2000 index of smaller companies rose 1.07, or 0.2 percent, to 551.95.
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