Stocks Finish Mixed as Tax-Cut Rally Fades
NEW YORK (
) -- The
Dow Jones Industrial Average
finished in the negative territory Tuesday as initial euphoria from the extension of Bush-era tax cuts for the next two years waned late in the day.
After running up more than 90 points to a session-high of 11,451, the blue-chip index closed down 3 points, or 0.03%, at 11,359. The
S&P 500
finished flat at 1224 after hitting a two-year high at 1235.05, while the
Nasdaq Composite
rose for the fifth straight day, tacking on 4 points, or 0.1%, to settle at 2598.
Capital goods and conglomerate stocks saw the session's biggest gains with
Caterpillar
(CAT) - Get Report
,
General Electric
(GE) - Get Report
and
Chevron
(CVX) - Get Report
posting the biggest percentage gains within the Dow.
3M
(MMM) - Get Report
was the biggest blue-chip loser. The diversified industrial giant, whose products include Post-Its and air purifiers, said it expects to earn between $6.17 and $6.37 a share, excluding pension expenses, in fiscal 2011, an outlook that implied potential downside to the average analysts' estimate for a 2011 profit of $6.20 a share. The stock closed down more than 3% at $84.19.
JPMorgan Chase
(JPM) - Get Report
and
Hewlett Packard
(HPQ) - Get Report
were also among the Dow's biggest laggards, falling 1.5% and 1.6% respectively.
Late Monday
President Obama agreed to extend tax cuts enacted by the Bush administration for all income levels for two years. Critics said repealing the tax cuts could weaken the economy by hurting consumer spending. The deal reduces worker payroll taxes for one year and extends credits for small businesses in addition to extending unemployment benefits.
In a press conference Tuesday afternoon, President Obama said that the compromise was necessary to help the economy but promised a renewed fight in 2012 when the tax cuts for the wealthy would expire again.
Stocks rallied earlier in the session as investors cheered the resolution of the tax uncertainty.
"The market is hoping that hiring will pick up now that some of the uncertainty has been removed," said Peter Cardillo, chief market economist at Avalon Partners. "Lower interest means that all the money coming out of the bond market will go into equities."
Commodity prices, which surged on the news, were down from earlier highs. Cardillo attributed the retreat to profit-taking since he views the tax cut extension as a boon to commodities and expects the deal to increase economic activity.
"Metals especially have rallied substantially and there's some talk that China may raise rates as early as this weekend so there could be some profit-taking in anticipation of that," Cardillo said.
The January crude oil contract was down by 69 cents to settle at $88.69 a barrel after crossing the $90 mark earlier in the session. A day after gold settled at a record $1,415.30 an ounce, the most actively traded February
gold contract for the precious metals was off by $6.30 to $1,409.10 an ounce.
.
The
euro fell 0.3% against the dollar to $1.3263. The dollar index recovered from earlier weakness Tuesday afternoon, with the dollar index last higher by 0.3%.
In Ireland, the government voted to approve an austerity budget late Tuesday that would enable the country to receive the €67.5 billion aid package from the European Union and the International Monetary Fund.
The FTSE in London gained 0.7%, and the DAX in Frankfurt also finished ahead by 0.7%. Hong Kong's Hang Seng added 0.8%, while Japan's Nikkei dropped 0.3%.
In the U.S, the
Federal Reserve
said Tuesday afternoon that consumer borrowing rose $3.38 billion after rising $2.1 billion in September, led by an increase in non-revolving credit. Economists had projected a $2.3 billion decline in consumer credit in October, according to Briefing.com.
|
McDonald's
(MCD) - Get Report
shares hit an all-time high of $80.50 on Tuesday and closed up 0.9% at $80.34. Investors anticipate strong November sales figures when the company releases its report on Wednesday. Analysts are expecting a monthly same-store sales increase of 5.1%.
Several other restaurant stocks hit fresh 52-week highs on Tuesday including
Starbucks
(SBUX) - Get Report
,
Brinker International
(EAT) - Get Report
and
Cheesecake Factory
(CAKE) - Get Report
.
Shares of
Citigroup
(C) - Get Report
were up 3.8% to $4.62 as the U.S. government sold its remaining stock in the bank for $10.5 billion, bringing taxpayers' profit on the $45 billion investment to $12 billion.
AutoZone
(AZO) - Get Report
exceeded analysts' first-quarter estimates with earnings of $3.77 a share on sales of $1.79 billion. Wall Street had expected earnings of $3.40 a share on sales of $1.71 billion. Shares fell 0.6% to at $260.15.
Talbots'
(TLB)
shares plunged 22% to $8.81 after the retailer cut its year-end adjusted earnings guidance to a range of 70 cents to 78 cents a share from a previous range of 84 cents to 92 cents a share.
Shares of
Nicor
(GAS)
fired up 4.3% to $48.79 on news that it will be acquired by
AGL Resources
( AGL) in a cash and stock deal with an enterprise value of $3.1 billion. AGL's stock shed 5.8% to $34.98.
Shares of
NVIDIA
(NVDA) - Get Report
jumped 3.2% to $14.98 after it said late Monday that it had won 200 designs to include its graphics chips in notebook PC's that use
Intel's
(INTC) - Get Report
Sandy Bridge microprocessor.
Sanofi Aventis
(SNY) - Get Report
said it was unwilling to meet
Genzyme's
( GENZ) demands to raise its $18.5 billion offer and make a later payment on the drug Campath,
Bloomberg News
reported citing three people familiar with the matter. Shares of Sanofi rose 0.7% to $32.16 while the stock of Genzyme slid 0.6% to $70.26.
The benchmark 10-year Treasury note weakened 1 25/32, lifting the yield to 3.141%, as investors worried about the impact of the Bush tax cuts extension on mounting deficits.
--Written by Melinda Peer and Shanthi Bharatwaj in New York
.
Disclosure: TheStreet's editorial policy prohibits staff editors and reporters from holding positions in any individual stocks.