Stocks Creep Up Toward the Flat Line
Updated from 2:08 p.m. EDT
New York's major averages were tiptoeing up to the flat line Tuesday as investors digested a cautious outlook at
Wal-Mart
(WMT) - Get Report
, the return of surging oil futures, and sobering words on the liquidity crisis from
Federal Reserve
Chairman Ben Bernanke.
The
Dow Jones Industrial Average
continued to suffer -- recently falling 46 points at 12,830 -- as it saw pressure from both Wal-Mart and the day's worst-performing component,
Hewlett-Packard
(HPQ) - Get Report
.
But the
S&P 500
was down only a half-point to 1403, and the
Nasdaq Composite
eked out a 1-point gain at 2490.
"We're in no-man's land," said Fred Dickson, senior vice president and market strategist with D.A. Davidson. "Little incremental news items have what appear to be fairly significant intraday market impact, but when you look at it over four or five days, they cancel each other out."
Dickson added that that there isn't enough good news to push investors on the buy side much higher, and further drags remain in stubbornly high oil prices and the weak U.S. dollar.
"Overall, investor confidence seems very, very low," he said. "The real good news is that we haven't seen big drops on light volume, and typically that's what we'll see in a really crummy market." He noted that that excludes "occasional" drops like the one that occurred Friday, which was, at any rate, followed by a Monday bounce-back.
Charles Rotblut, senior market analyst with Zacks Investment Research, said, "It seems like people are on hold to see whether we'll actually see the second-half recovery occur. We're entering a period without a lot of catalysts: earnings season is over, and the Fed is on hold at least until August. People are focusing on oil and gas to see how expensive it'll be for people to fill their tank this summer."
Indeed, stocks were under pressure as crude oil jumped to a new intraday high of $126.98 a barrel before easing to $125.43, a gain of $1.20. The nationwide average for gas prices at the pump hit yet another new record of $3.732.
"Obviously every time
oil turns up, then there's a little bit of fear that this is going to squeeze off consumption," said Kenny Landgraf, president and founder of Kenjol Capital Management. "There also are worries about inflation: 'Where is there an end in sight for this?'"
He commented that ongoing concerns about worldwide supply disruptions, together with last week's Goldman Sachs prediction that oil could ratchet up to $200 within two years, have had a substantial impact on people's willingness to push prices ever higher.
"That might be a bubble, but who wants to stand in front of that train?" he said. "There are too many tough geopolitical events going on for you to want to get on the short side of that."
Gold futures sank $15.30 to $869.60 an ounce. The U.S. dollar's earlier gains were deflating a bit, but the greenback still recently firmed by 0.3% against the euro at $1.5540. Against the yen, the dollar added 0.8% to 104.71.
Also weighing on investors Tuesday were Bernanke's comments at an Atlanta Fed conference this morning. The central-bank chief said that, despite some "welcome signs" that liquidity turmoil is abating, "at this stage conditions in financial markets are still far from normal."
Bernanke cited several justifications for that assessment, including the fact that a number of "moribund" securitization markets remain, that risk spreads are still "quite elevated," and that pressures persist in short-term funding markets.
"Ultimately," he said, "market participants themselves must address the fundamental sources of financial strains -- through deleveraging, raising new capital, and improving risk management --and this process is likely to take some time."
On the corporate front, Wal-Mart's current-quarter outlook leaned to the lower end of expectations, even as its first-quarter profit grew by 6.9% to a better-than-expected $3.02 billion, or 76 cents a share. Shares dropped 2%.
Separately, the Commerce Department reported that retail sales, excluding cars, swelled by 0.5% in April, compared with the 0.2% economists' consensus. March data were revised upward to 0.4%. Keeping in the effects of declining auto sales, the numbers showed a drop of 0.2%, as expected.
Meanwhile, Hewlett-Packard confirmed that it will acquire
Electronic Data Systems
(EDS)
. H-P said it will pay $13.9 billion in cash, or $25 a share, nearly a billion higher than the top end of the range cited by news reports yesterday. H-P shares slid 5.8% as EDS -- which surged in the prior session -- climbed another 1.3% even though the stock was downgraded by at least three analysts.
Elsewhere in tech,
Research In Motion's
(RIMM)
price target was boosted by both Citigroup and Oppenheimer a day after the company unveiled its new BlackBerry Bold product, a possible rival to
Apple's
(AAPL) - Get Report
iPhone. Still, RIMM shares were stepping back 0.7%, in retreat from some of Monday's robust gains.
In other research calls, Oppenheimer cut its second-quarter, fiscal 2008 and fiscal 2009 earnings estimates on
Goldman Sachs
(GS) - Get Report
,
Merrill Lynch
(MER)
,
Lehman Brothers
(LEH)
and
Morgan Stanley
(MS) - Get Report
, in part because of expected revenue reversals that will be required by a new accounting treatment.
Goldman shares were down only a fraction recently, but the remaining stocks were losing at least 1.1% apiece.
Elsewhere,
Liz Claiborne
(LIZ)
shares moved up 2.2% after the clothing designer said adjusted earnings came to 28 cents a share in the first quarter, flying past the dime-a-share average Street target from Thomson Reuters. Including heavy restructuring costs, the company swung to a continuing-operations loss of 16 cents a share.
Also, after the prior close
Sirius Satellite Radio
(SIRI) - Get Report
reported a top line that came in
a hair below estimates
even as its narrowed loss matched expectations. Also, in the earnings call, CEO Mel Karmazin voiced frustration with the time it has taken the Federal Communications Commission to review its proposed merger with
XM Satellite Radio
(XMSR)
.
Sirius shares were off 1.4%; XM, which reported a
Monday, recently added a penny at $12.31.
Returning to economic data, the Commerce Department said business inventories were up 1% sequentially in March, or 6.3% higher year over year. Based on current sales data, it should take 1.27 months -- virtually the same as last year -- to work through that inventory.
Also, the Labor Department said import prices, excluding the volatile effects of oil, were up 1.1% in April -- the same as the prior month. Stripping out agricultural products, export prices ticked up 0.6%, or less than half the growth seen in March.
Treasury prices were sliding. The 10-year note was off 24/32 in price to yield 3.88%, and the 30-year bond plunged 1-5/32 in price, yielding 4.60%.
Foreign markets were mainly higher. In Asia, Tokyo's Nikkei 225 ramped up 1.5% overnight, and Hong Kong's Hang Seng Index leaped 2%. As for Europe, Germany's Xetra Dax rose 0.3% and the Paris Cac tacked on 0.5%. London's FTSE 100 gave up 0.1%.