Stocks Finish Session Mixed
Wall Street pared an early advance to end mixed Tuesday as investors’ persistent concerns about interest rates and the economy countered relief brought by an upbeat home-building report.
A sharply stronger-than-expected jump in new construction fed optimism that the economy remained sturdy despite higher lending rates and gasoline prices. However, disappointing forecasts for June business sent home builders’ shares sliding.
Upbeat sales data from Caterpillar and steady oil prices also gave stocks support. But although the market recovered somewhat from Monday’s decline, erratic trading like Tuesday’s is anticipated while investors await the Federal Reserve’s statement on inflation and economic growth after its meeting next week.
Analysts say the lack of economic data will probably leave investors unsure about buying stocks before the Fed’s interest rate decision. Last week, increased certainty that the central bank will hike rates again may have helped the market steady itself from nearly six weeks of losses, but Wall Street has since struggled to build momentum.
“I think today is more of a quiet rally or stabilizing in the marketplace,” said Jay Suskind, head trader with Ryan, Beck & Co. “Inflation, stagflation, interest rates -- there are all those words out there making this a very tough market.”
The Dow Jones industrial average gained 32.73 points, or 0.3%, to 10,974.84, after rising almost 88 points earlier.
Broader stock indicators finished little changed. The Standard & Poor’s 500 index fell 0.02 point to 1,240.12, and the Nasdaq composite index lost 3.36 points, or 0.2%, to 2,107.06.
Declining issues overtook advancers by 9 to 7 on the New York Stock Exchange.
Long-term bond yields continued to edge higher, with the 10-year U.S. Treasury note rising to 5.15% from 5.14% on Monday.
Crude oil futures leveled off despite continued tension over Iran’s nuclear program, which some traders suggested could be a sign of near-term stability for the energy market. A barrel of light crude dropped 4 cents to settle at $68.94 in New York trading.
Elsewhere, the U.S. dollar fell against the yen and the euro, and gold futures added $8.10 an ounce to $576.90.
Wall Street appeared to be coming to terms with the fact that the recent uptick in core inflation has almost guaranteed a rate hike from the Fed next week and raised the chances of another increase in August. Although stocks have steadied from their recent pullback, investors were waiting for the Fed’s opinion of the economy before placing bets.
“The market has pretty high expectations that two more hikes are coming and that there won’t be any cuts,” said Scott Merritt, U.S. equities strategist for JPMorgan Asset Management. “I think the market has fully discounted that in their prices.”
In economic news, the Commerce Department said May housing starts grew 5% to 1.96 million to beat estimates of 1.87 million, while the number of permits issued slid 2% to 1.93 million. The upswing in home-building activity was attributed to improved weather last month.
But a weak June outlook dragged on home builders. D.R. Horton shed 61 cents to $23.40, Hovnanian Enterprises lost 34 cents to $28.65 and Toll Bros. slid 49 cents to $26.05.
In other market highlights:
* Kroger jumped $1.01 to $20.47. Profit for the fiscal first quarter, excluding legal costs, increased to 45 cents a share, exceeding a Bear Stearns analyst’s 40-cent estimate. Same-store sales are expected to climb 4.5% in the year ending in February as the firm’s supermarkets benefit from shorter checkout times and higher sales of organic foods.
* Caterpillar climbed $1.04 to $70.99. Sales last month were “surprisingly strong,” JPMorgan analyst Gary McManus wrote in a note to clients. Most notably, sales of engines in May surged 18%, the most since September, according to McManus. The gains came from the oil and industrial markets.
* General Motors fell for the first time in five days after its debt rating was cut deeper into high-yield, or junk, territory by Moody’s Investors Service and Standard & Poor’s. The stock retreated 70 cents to $25.65 as the automaker put up collateral to extend a $5.6-billion credit line. The move was meant to protect lenders in case GM couldn’t meet loan payments.
Rival Ford Motor slid 34 cents to $6.40, its lowest price in 13 years. Ford is down 17% this year because of concerns over lost market share in North America.
* Apollo Group fell $2.91 to $51.91. The owner of the University of Phoenix and other for-profit schools said fiscal third-quarter earnings fell 5.9% as the company opened four campuses.
* JetBlue Airways gained 70 cents to $12.23, the highest price since January, after Morgan Stanley recommended buying the shares. The low-cost airline was given an “overweight” rating in new coverage by analyst William Greene, who called JetBlue his top airline pick.
* McDonald’s made an alliance with Chinese oil company Sinopec to build drive-through restaurants at some of its 30,000 gas stations in China. McDonald’s rose 11 cents to $32.96.
* Target said its June same-store sales were tracking toward the upper half of a projected 3% to 5% growth range. Target nonetheless fell 6 cents to $49.04.
