Mixed End to an Up-Down Day

Stocks close a volatile day roughly flat as investors sorted through trade deficit and energy data as well as comments from the Fed chair. Frank Curzio reviews the action in The Real Story (above).
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Updated from 4:02 p.m. EST

Stocks in New York ended Tuesday's seesaw trading session narrowly mixed as investors, who earlier lent an ear to the

Federal Reserve

chairman, weighed earnings and more job losses symptomatic of the economic downturn.

The

Dow Jones Industrial Average

sank 25.41 points, or 0.3%, to 8448.56. The

S&P 500

edged up 1.49 points, or 0.2%, at 871.75, and the

Nasdaq

rose 7.67 points, or 0.5%, to 1546.46.

Alcoa

(AA) - Get Report

,

General Electric

(GE) - Get Report

and

Bank of America

(BAC) - Get Report

led the decliners on the Dow, balanced out this time by gains in financials

Citigroup

(C) - Get Report

and

JP Morgan Chase

(JPM) - Get Report

.

Alcoa

kicked off earnings season late Monday, posting a $1.2 billion loss in the fourth quarter on steep declines in demand for aluminum. Shares of the company, which recently announced workforce and output reductions, lost 5.1% to $9.55.

On Tuesday,

ING

(ING) - Get Report

said that it would add to the nation's unemployed, slashing 750 domestic jobs, or 8% of its workforce by the quarter's end.

Pharmaceutical giant

Pfizer

(PFE) - Get Report

is also planning on laying off 800 research employees globally, according to a report in

The Wall Street Journal

Tuesday.

ING gave up 4.4% to $10.74, but Pfizer added 1.3% to $17.59.

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In data released Tuesday, the Commerce Department said the

trade deficit

narrowed to $40.1 billion, the slimmest in five years and down from $56.7 billion a month prior. Economists had expected the deficit to narrow significantly with the fall of oil prices impacting imports, but they underestimated the extent, with predictions for $51 billion.

For the three months ending in November, the average trade deficit was calculated at $51.2 billion, vs. $57.4 billion for the three months prior.

To the extent that widely expected stimulus packages in the U.S., Europe and China lift the global economy, the reduction in the trade deficit will reverse, wrote Peter Morici, a professor at the University of Maryland School of Business and former chief economist at the U.S. International Trade Commission.

"Oil prices will rise again, and with China increasing subsidies on exports, U.S. imports of consumer goods will soar," wrote Morici. "The trade deficit will emerge as a major drag on the demand for U.S. made goods and services, and pull the U.S. economy back into recession as the effects of stimulus spending wear off."

In the meantime, the narrower-than-expected deficit will boost forecasts for the fourth quarter's gross domestic product, now at -6.5%, by about a percentage point, wrote Tony Crescenzi, chief bond market strategist for Miller Tabak, on his

RealMoney.com blog

. Such an increase is "a large amount that looks small in the context of current expectations," he writes.

Chairman of the Federal Reserve, Ben Bernanke, said at the London School of Economics early Tuesday that an economic stimulus package could provide a boost, but the government may need to take other "strong measures" to stabilize the financial system.

"History demonstrates conclusively that a modern economy cannot grow if its financial system is not operating effectively," Bernanke said.

Speaking of financials, the Dow's greatest gainer of the day,

JPMorgan

has accelerated its earnings schedule, and will now report results on Thursday, a week earlier than expected. Shares were up 5.8% at $26.35.

Rising 5.4% to $5.90,

Citigroup

confirmed in a statement Tuesday that it is in talks to merge its Smith Barney brokerage business with

Morgan Stanley's

(MS) - Get Report

wealth management business. A deal is expected to be announced in the next two days, although the company said it couldn't assure an agreement would be reached.

In other corporate news,

Yahoo!

(YHOO)

confirmed rumors it will name Carol Bartz, former chief executive of software company

Autodesk

(ADSK) - Get Report

, as its new chief executive. Shares were off by almost 1% at $12.10.

Meanwhile, some optimism on the part of Ben Bernanke in addition to seasonality and Saudi Arabia announcing that it would further restrict supply gave a slight early boost to oil prices, noted Alaron energy analyst Phil Flynn. Those factors, however, were partially offset by the release of the Energy Information Administration's short-term energy outlook.

The energy forecast estimates that U.S. real gross domestic product (GDP) will decline by 2% in 2009, leading to further decreases in domestic energy consumption for all major fuels. It projects the start of economic recovery in 2010, with 2% year-over-year growth in GDP.

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Hard economic times continue to spur downward revisions to world oil consumption. Global consumption is estimated to have been largely unchanged in 2008 and is projected to fall by 800,000 barrels per day in 2009, said the EIA.

"Really the EIA is calling for a recession throughout all of 2009, and if that's a correct assumption global energy demand will be extremely challenged," says Flynn, calling the outlook not-surprisingly bearish. "This is something the oil market will consider, although it confirms what it already suspected."

The EIA estimated Tuesday that West Texas Intermediate crude oil , which has declined from $133 per barrel in July to $41 in December, will average $43 per barrel in 2009 and $55 in 2010.

After adding more than $1.50 earlier in the day, oil settled with a gain of 19 cents at $37.30 a barrel, while gold lost 30 cents to settle at $820.70 an ounce.

Longer-dated Treasuries were recently rising after a mixed day; the 10-year note was adding 7/32 to yield 2.3%, and the 30-year was down 4/32, yielding 3%. The dollar was recently weaker against the euro and pound, and yen.

Overseas, the FTSE in London and the DAX in Frankfurt were both edging lower Monday, while Japan's Nikkei Hong Kong's Hang Seng ended with losses.

Copyright 2009 Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed. AP contributed to this report.