Stocks Creep to the Downside

Strong earnings from Visa and MasterCard can't counter downward pressure from disappointments at Deutsche Bank and Countrywide as investors steel themselves for more telling data reports.
Publish date:

Updated from 12:17 p.m. EDT

Wall Street was sluggish Tuesday in the face of an ongoing

Federal Reserve

meeting, as well as more uneven earnings reports and dour economic data.


Dow Jones Industrial Average

was off 33 points to 12,838, and the

S&P 500

surrendered 5 points at 1391. The

Nasdaq Composite

lost 8 points to 2416.

"It's another one of these quiet days," said Robert Pavlik, chief investment officer with Oaktree Asset Management. "The market is waiting on the Fed and the

gross domestic product report, and then it'll be waiting on the employment report. The market is looking for another catalyst to drive us forward."

The Fed, which isn't due to render any decisions until Wednesday, is widely expected to shave 25 basis points off the fed funds target rate. Many observers have also predicted that the move will mark a pause in the central bank's months-long easing cycle. The overnight lending rate, which currently stands at 2.25%, has been brought down by 300 basis points since September.

Preliminary GDP numbers are due out tomorrow, as well, and the Labor Department should report its monthly employment data on Friday.

"It's all about the Fed statement tomorrow," said Chip Hanlon, president of Delta Global Advisors and contributor to

, a sister site to

. "If the Fed comes out of it and says it thinks it's done enough, and at least indicates it's going to pause its easing campaign, that continues to help the dollar and take the edge off these commodities in the short term."

Hanlon noted that futures were today pricing in a 16% chance that the Fed won't cut rates at all, which he commented would be a long-term positive indicator, even if stocks react negatively in the short run. The probability of a quarter-point easing stood at 84%, leaving no room for a steeper cut.

As for earnings, the newly public


(V) - Get Report

said first-quarter income jumped 27.6% on a spike in revenue, which on an adjusted basis topped the average Wall Street estimate. The stock was also stamped with positive initial ratings from SunTrust and Wachovia. After an initial stumble, shares were lately tracking up 1.1%.



(MA) - Get Report

jumped 11.9% after demolishing analyst targets with an adjusted first-quarter profit of $3.01 a share.

Meanwhile, Dow component


(MRK) - Get Report

slid 9.9% after the Food and Drug Administration rejected its new drug, MK-0524A, which was proposed to raise levels of "good" cholesterol in the body.

On the economic docket, the Conference Board reported that its April consumer-confidence index sank to 62.3, a bit better than expected, from the prior month's revised reading of 65.9. The index's expectations figure, which points to how respondents feel the economy will perform over the next several months, ticked up to 50.1 from last month's 49.4.

"The headline is horrible, but at least the key expectations index did not repeat its March plunge," said Ian Shepherdson, chief U.S. economist with High Frequency Economics. "This is still disastrously weak, though, consistent with real consumers' spending falling at a year-over-year pace of about minus 2%. There is nothing remotely good in here."

Shepherdson added that there is "every chance" of further declines over the next few months, but conceded that the federal government's tax rebate checks, which began shipping out yesterday, might offer "temporary" relief.

Pavlik agreed regarding the effects of the stimulus package. "Sentiment might improve literally when the checks start arriving and they feel a little more positive, having a few more extra dollars in their pocket," he said.

Elsewhere, the February S&P/Case-Shiller survey revealed that its 10-city composite -- a compiling of housing data from 10 major U.S. cities -- showed a "record" year-over-year slide of 13.6% in prices of existing single-family homes. The 20-city composite sank 12.7%, worse than the negative 12% consensus, as 17 of those cities registered all-time lows in their declines from last year.

RealtyTrac added more sour data to the pile, saying that first-quarter foreclosures rocketed 112% from last year to 649,917, or one in every 194 U.S. households. The number also represents a 23% jump from the prior quarter.

Back on the corporate front,



saw choppy trading after losing $893 million, or $1.60 a share, in the first quarter, as its credit-loss provision rose to $1.52 billion and charge-offs more than doubled from the prior quarter.

Bank of America

(BAC) - Get Report

agreed to take out the company in January. Countrywide shares were recently up 1.5%, though BofA stock dipped 1.2%.


Deutsche Bank

(DB) - Get Report

reported that $4.2 billion in first-quarter writedowns have led to its first quarterly loss in five years, and shares slipped 0.7%. Also, German insurance giant



sank 1.8% after saying it will probably be forced to write off $1.4 billion in bad assets, which will contribute to pulling its profit down 66% from a year earlier and make its medium-term goals "harder" to achieve.

Oil companies were flush with positive news, however, as the recent crude-futures climb fattened first-quarter results.

Royal Dutch Shell


said its first-quarter profit ballooned 25% to $9.08 billion, and


(BP) - Get Report

reported a 63% surge in earnings to $7.6 billion. Shares were up roughly 5% apiece.

Similarly, agricultural-products firm

Archer Daniels Midland

(ADM) - Get Report

said rising commodities prices pushed its bottom line up 42% in the fiscal third quarter. But shares of ADM, the nation's biggest ethanol producer, shed 4.4% on concerns that the government will pull back on some of its hefty support for the industry as a whole.

At the same time crude oil was backing off, recently plunging by $3.31 at $115.44 a barrel. Gold futures slid $19.70 to $875.80. The U.S. dollar firmed by 0.4% against the euro at $1.5585, but lost 0.6% against the yen.

In notable analyst calls,


(WB) - Get Report

was upgraded to buy from hold at Deutsche Bank and shares were recently gaining 3%. Conversely, RBC Capital Markets removed fertilizer maker



from its top picks list, even as the firm kept an outperform rating on the stock. Potash shares slid 5%.

Treasury prices were rising. The 10-year note was up 10/32 in price to yield 3.79%, and the 30-year bond climbed 21/32 in price, yielding 4.52%.

Overseas markets were mixed. In Asia, Tokyo's Nikkei 225 rose 0.2% overnight to 13,894, and Hong Kong's Hang Seng Index climbed 1%. Among European exchanges, the FTSE 100 in London was down marginally, and Germany's Xetra Dax gave up 0.6%. The Paris Cac was off 0.7%.