Stocks Slip on Mixed Signals
Stocks mostly fell Tuesday as investors weighed Federal Reserve Chairman Alan Greenspan’s optimistic economic outlook against soaring bond yields and some new corporate profit warnings.
But Wall Street’s losses overall were modest.
In other trading, the dollar strengthened and gold slumped.
The Dow Jones industrial average closed down 48.18 points, or 0.5%, at 9,128.97, after falling as much as 86 points.
The Standard & Poor’s 500 index slipped 3.44 points, or 0.3%, to 1,000.42.
The Nasdaq composite index was off 1.61 points, or 0.1%, to 1,753.21.
Share prices peaked within the first five minutes of trading and then retreated even as Greenspan told Congress that the U.S. economy is poised to accelerate.
“To get the market really moving, we’re going to have to have a dramatic upturn in earnings,” John Carey, manager of the $5.8-billion Pioneer Fund, told Bloomberg News.
Some reports Tuesday injected doubts about the earnings outlook. Financial giants Fannie Mae and FleetBoston Financial reported results that disappointed some investors. Fannie Mae slid $2.32 to $69.06 while FleetBoston dropped $1.11 to $30.43.
Still, other reports have been upbeat as second-quarter earnings reporting season begins in earnest.
Merrill Lynch posted better-than-expected results, and its stock jumped $2.39 to $53.80.
After the close of regular Wall Street trading, tech bellwether Intel reported a doubling of its second-quarter net earnings, sending its shares up on Instinet and bolstering stocks’ outlook for Wednesday.
Intel rose to $25.70 in after-hours trading, after adding 8 cents to $24.10 in the regular session.
“I think the expectation level for earnings is very reasonable,” said Stephen Massocca, president of Pacific Growth Equities. “Earnings will by and large meet and exceed estimates, which bodes well for the market.”
Some analysts said the stock market held up well Tuesday, considering the magnitude of the jump in bond yields. The yield on the two-year Treasury note ended at 1.45%, up from 1.34% Monday. Longer-term yields rose even more.
Losers beat winners by 2 to 1 on the New York Stock Exchange, but by a narrower 9 to 7 on Nasdaq. Trading was active.
If the economy accelerates in the second half of the year, investors will be more interested in buying stocks and less interested in buying bonds, many analysts say. Though rising interest rates can dampen a stock rally, it isn’t unusual for investors to focus more on corporate earnings than interest rates, experts say.
A stronger dollar also could attract foreign capital to U.S. stocks, analysts said.
The dollar, bolstered by Greenspan’s comments, a strong June retail sales report and a report showing that business conditions for manufacturers in New York state remained relatively bright in an early-July survey, rose to its highest level against the euro since May 1. The euro ended at $1.117, down from $1.128 Monday.
In other highlights:
* Motorola, the world’s No. 2 mobile phone company, posted a second-quarter profit but cut its third-quarter outlook after the market close Tuesday. Its shares fell to $9.66 in after-hours trading after closing at $9.78, up 28 cents, in regular trading.
* Shares of Philip Morris parent Altria Group fell $1.46 to $40.50. An appellate court ruled Monday that a judge did not have the authority to slash the bond that the firm’s tobacco subsidiary must post while appealing a $10.1-billion verdict.
* Gold fell $5.60 to $342.10 an ounce in New York trading. A stronger greenback erodes demand in Europe and Asia for gold, which is denominated in dollars. Among gold stocks, Goldcorp fell 58 cents to $11.24 and Newmont Mining lost $1.36 to $31.84.
* Oil gained 35 cents to $31.62 a barrel in New York as Hurricane Claudette disrupted oil drilling and shipping on the Texas coast.
