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US stocks fluctuate on anxiety over earnings reports

WALL Street has managed an advance the hard way -- zigzagging on a mix of earnings and economic news before closing moderately higher.

The major indexes changed course several times in yesterday's session, rising in response to Pfizer Inc.'s US$68 billion planned acquisition of Wyeth, a deal that reassured investors that mergers could still take place in a recession. And the National Association of Realtors said existing homes rose rather than fell in December, stirring hopes that lower prices and falling interest rates are starting to chip away at a glut of homes with "for sale" signs.

But news from big companies weighed on the market. Downbeat comments from Caterpillar Inc. about the health of its business curbed the advance in the Dow Jones industrials. Caterpillar shares dropped more than 8 percent after the maker of heavy equipment said plunging commodity prices left the company "whipsawed" in the fourth quarter. Caterpillar said it would offer buyouts to 25,000 employees in the US and cut executive pay.

Home Depot Inc., another Dow component, also announced big job cuts. The company said it would slash 7,000 jobs and close its smaller Expo chain as it struggles with the weak housing market.

Analysts expected that with earnings reports flooding in, the market would have a hard time sorting through all the data and settling on a direction. They're also expecting more volatility as reports continue over the next two to three weeks.

"There's a lot of things for investors to digest in what is a very uncertain market environment, and I think that is why you see some hesitation," said Todd Salamone, senior vice president of research, Schaeffer's Investment Research.

After the close of trading, chip maker Texas Instruments Inc. also announced job cuts _ a total of 3,400, with 1,800 coming from layoffs. The company also said its fourth-quarter earnings fell sharply.

Concerns about the banking industry added to the market's uncertainty, and most financial stocks fell. After the closing bell, American Express Co. announced fourth-quarter earnings that missed analysts' estimates by a penny. The company, as expected, reported that its cardholders cut back their spending during the October-December period.

The Dow rose 38.47,or 0.48 percent, to 8,116.03, after briefly moving into negative territory. yesterday's advance was just the sixth for the Dow this month; after a late-year rally, the market has again been torn by volatility as investors worried about the economy, earnings and the health of the banking industry.

The Standard & Poor's 500 index rose 4.62, or 0.56 percent, to 836.57, and the Nasdaq composite index rose 12.17, or 0.82 percent, to 1,489.46.

The Russell 2000 index of smaller companies rose 5.70, or 1.28 percent, to 450.06.

Advancing issues outnumbered decliners by about 2 to 1 on the New York Stock Exchange, where consolidated volume came to 5.13 billion shares, down from Friday's 5.72 billion.

Another unnerving unknown for the market is the exact form that President Barack Obama's proposed stimulus package will take after it has worked its way through Congress.

Senate committees are scheduled to take up the massive plan today and the full House is expected to vote on its version of the US$825 billion package tomorrow. The plan could include big tax cuts and a massive public works program.

"They know things aren't going to get any better soon, but want to see what this package is going to look like," Doug Roberts, chief investment strategist at Channel Capital Research, said of investors.

Meanwhile, earnings are likely to make the next few weeks rocky.

"It's almost like a teeter-totter right now," said Alan Lancz, money manager at Alan B. Lancz & Associates. "Earnings season is always treacherous in this kind of global economic environment with all the uncertainty."

Of the companies in the Standard & Poor's 500 index that have reported results in recent weeks, more than half have fallen short of analysts' already reduced estimates. The poor showing has left investors nervous that the economy is in worse shape than feared.

Caterpillar was one of the latest disappointments. Shares dropped US$2.99, or 8.4 percent, to US$32.67.

A bit of bright news came from McDonald's Corp., which posted better-than-expected profits but said revenue fell from a year earlier. Same-store sales, or sales at stores open at least a year, rose worldwide and in the US, where the company's low-prices have been a draw for consumers worried about the economy. Shares gained 38 cents to US$58.40.

American Express fell 80 cents, or 5 percent, to US$15.20, and was little changed in after-hours trading following its earnings release. Texas Instruments fell 22 cents to US$14.77, but rose to US$15.50 in after-hours trading.

Wyeth fell 35 cents to US$43.39, and Pfizer fell US$1.80, or 10.3 percent, to US$15.65. Pfizer said it will cut its dividend as part of the deal, though Wall Street often sells companies that announce acquisitions.

Bond prices fell yesterday as stocks rose. The yield on the benchmark 10-year Treasury note, which moves opposite its price, rose to 2.65 percent from 2.62 percent late Friday. The yield on the three-month T-bill, considered one of the safest investments, rose to 0.13 percent from 0.09 percent late Friday.

The dollar fell against other major currencies, while gold prices rose.

Light, sweet crude slipped 74 cents to settle at US$45.73 on the New York Mercantile Exchange.

Overseas, Japan's Nikkei stock average fell 0.08 percent. Britain's FTSE 100 rose 3.86 percent, Germany's DAX index rose 3.54 percent, and France's CAC-40 jumped 3.73 percent.


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