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TheStreet Open House

Stocks Close Mixed as Housing, Bernanke Dent Sentiment


NEW YORK ( TheStreet) -- U.S. stocks finished mixed Wednesday after a disappointing read on the housing market and bearish comments from Federal Reserve Chairman Ben Bernanke on Europe.

The Dow Jones Industrial Average, down three times in four sessions, fell by 45.6 points, 0.35%, at 13,125. About half of all blue-chip components traded in positive territory, led by Coca-Cola (KO), Home Depot (HD) and American Express (AXP). The biggest intraday laggards included Hewlett-Packard (HPQ), Alcoa (AA) and Caterpillar (CAT).

The S&P 500 ticked down 2.6 points, or 0.19%, at 1403. The Nasdaq inched higher 1.2 points, or 0.04%, at 3075 after Oracle (ORCL) reported robust first-quarter earnings.

"I'm always surprised at how sticky the market can be to the upside. ," said James "Rev Shark" DePorre, founder and CEO of Shark Asset Management. "Despite lots of good reasons, both fundamental and technical, for a little weakness we just don't pull back very much."

DePorre added that he is keeping a short time frame given the unpredictability of current market conditions. "I try to avoid the being sucked into the constant top-calling and stay focused on finding new things to buy that might run for a day or two," he said.

Investors got another read on the housing market with a report from the National Association of Realtors showing that February existing-home sales declined from an upwardly revised January pace. However sales are well above year ago levels. Total existing-home sales slipped 0.9% to a seasonally adjusted annual rate of 4.59 million in February from an upwardly revised 4.63 million in January, but were 8.8% higher than the 4.22 million-unit level reported the same time last year. Economist surveyed by Thomson Reuters expected existing-home sales would increase to an annual rate of 4.62 million in February from the originally reported 4.57 million the preceding month.

Meanwhile, the Mortgage Bankers Association said Wednesday that mortgage applications on a seasonally adjusted basis fell 7.4% in the U.S. last week from one week earlier as interest rates climbed and discouraged many borrowers from refinancing their homes. The seasonally adjusted four-week moving average for mortgage applications was down 2.79%.

A downbeat assessment on Europe by Federal Reserve Chairman Ben Bernanke in the morning reminded investors that the U.S. was still vulnerable to an external shock. He also cautioned today that higher energy prices could curb short-term growth in the country.

Before the Committee on Government Oversight and Reform of the U.S. House of Representatives, Bernanke said that that U.S. banks and money market funds could get hurt by a bad turn in Europe's debt crisis. He noted that although U.S. banks have limited exposure to peripheral European countries, their exposure to European banks and the larger, "core" countries of Europe are "more material."

Moreover, he said that European holdings represented 35% of the assets of prime U.S. money market funds in February, leaving these funds "structurally vulnerable" despite some constructive steps such as improved liquidity requirements, taken since the recent financial crisis. Bernanke continued to defend the swap lines the Federal Reserve made available to Europe, saying that it has eased stresses in the global financial markets.


In his testimony to the House, Treasury Secretary Timothy Geithner also expressed cautionary thoughts on Europe. While he acknowledged the progress on fiscal reforms in the eurozone, he also pointed out that the challenge of restoring economic growth and competitiveness in the continent has been made more difficult "by the fact that in a monetary union, the member states do not have their own monetary policies or currencies that can adjust, and in Europe today, there is no mechanism for fiscal transfers to help cushion economic shocks."

That said, Geithner added that Europe has the ability to solve its problems and the International Monetary Fund should serve as a backstop rather than a primary route towards solving Europe's problems. He also said that Europe would not be helped in a way that would shift the burden to U.S. taxpayers.

In corporate news, Oracle (ORCL), the database giant, handily topped Wall Street's first-quarter earnings expectations. Oracle reported a non-GAAP profit of $3.13 billion, or 62 cents a share, for the three months ended Feb. 29 on revenue of $9.06 billion. Analysts were expecting earnings of 56 cents a share in the quarter on revenue of $9.02 billion. Shares were down 2.3% to $29.41.

General Mills (GIS), the maker of Cheerios, reported a slip in earnings as increasing input costs and prices conscious consumers in the fiscal third quarter weighed on profitability. Profit came in at $391.5 million, or 58 cents a share, in the quarter ending Feb. 26, down from $392.1 million a year earlier. Revenue came in at $4.12 billion, compared to analyst estimates for $4.09 billion. Shares slipped 0.5% to $38.58.

Jabil Circuit (JBL), the provider of electronics manufacturing services, posted second-quarter profit that was in-line with estimates but the low end of its third-quarter outlook came in below analysts' estimates. For its fiscal third quarter ending in May, Jabil forecast core earnings of 60 cents to 70 cents a share on revenue of $4.2 billion to $4.4 billion. Analysts forecast profit of 65 cents a share on revenue of $4.35 billion. Shares were down 2.3% to $25.88.

Hartford Financial Services (HIG) will split up after coming under pressure from hedge fund titan John Paulson. Hartford will wind down its individual annuity business and will sell or pursue "strategic alternatives" for the company's individual life, Woodbury Financial Services and retirement plans units, according to a statement. The split is a big victory for Paulson who took an 8% stake in Hartford. Shares of the company were up 1.2% to $21.98.

Reports on Tuesday said Hewlett-Packard was looking to merge its printer and PC division into one arm. According to AllThingsD, HP will merge its Imaging and Printing Group into the Personal Systems Group, and the combined unit will report to Executive Vice President Todd Bradley, citing sources familiar with the matter. Vyomesh "VJ" Joshi, who is in charge of Imaging and Printing, would leave the company. The plan is aimed at reducing costs, a person familiar with the matter told the Journal. The two units together generate about $65 billion a year in revenue. HP shares fell 2.2% to $23.46.

Overseas, London's FTSE closed ahead by 0.01%, and Germany's DAX finished up 0.23%. In Asia, Japan's Nikkei Average settled down 0.55% and Hong Kong's Hang Seng index closed lower by 0.15%.

May oil futures drifted $1.20 higher to $107.27 a barrel, while April gold futures added $3.30 to $1,650.30 an ounce as bargain hunters took advantage of Tuesday's dip.

The benchmark 10-year Treasury was last gaining 15/32, diluting the yield to 2.31%, while the U.S. dollar index was up 0.05%.

-- Written by Andrea Tse and Chao Deng in New York.



>To contact the writer of this article, click here: Andrea Tse.

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