Stocks Find Neutral Gear

Stocks in New York waver at the open to trade with minor losses as as uneasy investors digest weak corporate profit reports.
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Stocks in New York opened lower Tuesday as investors digested the first earnings of the season and the first policy speech of the year by

Federal Reserve

Chairman Ben Bernanke.

The

Dow Jones Industrial Average

was losing 0.4 points at 8473. The

S&P 500

was off by 0.9 points at 869, and the

Nasdaq

was down 0.4 points at 1538.

Alcoa

(AA) - Get Report

kicked off earnings season late Monday, posting a $1.2 billion loss in the fourth quarter on steep declines in demand for aluminum.

In data out Tuesday, the Commerce Department said the

trade deficit

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

The monthly Treasury budget is do out later in the day.

Chairman of the Federal Reserve, Ben Bernanke, said at the London School of Economics early Tuesday that while fiscal stimulus package is much needed, the government may need to infuse more capital into banks.

JPMorgan Chase

(JPM) - Get Report

accelerated its earnings schedule, and will now report results on Thursday, a week earlier than expected.

Citigroup

(C) - Get Report

and

Morgan Stanley

(MS) - Get Report

are expected to announce a deal in the next two days to combine their brokerage operations.

In commodities, oil was rising 59 cents at $38.18 a barrel, while gold was down 80 cents to $820.20 an ounce.

Longer-dated Treasuries were mildly lower; the 10-year note was retreating 3 0.5/32 to yield 2.3%, and the 30-year was down 8/32, yielding 3%. The dollar was stronger 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.

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