Updated from 4:06 p.m. EDT
The economy and corporate earnings looked a little stronger Tuesday, but investors couldn't resist the urge to take profits, leaving stocks only slightly higher.
A day after posting triple-digit gains, the
Dow Jones Industrial Average
gained 31.38 points, or 0.4%, at 8502.99, in volatile trading. The
, which also had a big jump on Monday, added 9.06 points, or 0.6%, at 1471.30. The
gained 3 points, or 0.3%, at 917.84.
More than two-thirds of S&P 500 companies have reported first-quarter results so far. Profits have risen an average of 12%, a growth rate not seen since the third quarter of 2000, and much higher than the 6% analysts were expecting. More than 60% of the companies have beat analysts' forecasts, according to Thomson First Call.
Ever since the war in Iraq took a decisive turn two weeks ago, the market has been extremely volatile on moderate volume, which leaves some doubting that the recent rallies have legs.
"The market is short-term oriented, considering yesterday's huge move on questionable volume after a couple of down days," said Brian Belski, fundamental market strategist at U.S. Bancorp Piper Jaffray. "The timeframe for investors is looking shorter and shorter, so what you're seeing is more and more volatility in a shorter and shorter period of time."
Technical levels again came into play on Tuesday, as the market swung higher only to drop back. "The market is working on an extended overbought condition," said Richard Dickson, chief market strategist at Lowry Research. "It's deterring buyers from paying up a whole lot more for stocks, and on the other side, people are using the higher prices to exit. Either way, we're seeing limited upside at this point."
In economic news, the Conference Board said consumer confidence skyrocketed to a reading of 81 in April from 61.4 in March. The number topped the 70 reading expected by economists and marks the first rise in five months, after the index hit its lowest level since 1993 last month.
But with the war having such a big efect on confidence, questions remain about how strong the consumer really is. "The biggest part of that number is whether we get out of these trough levels of consumer confidence," said Belski. "Retail stocks have had such huge runs, it's a question of if they're priced to perfection at this point."
The Labor Department said first-quarter employment costs rose 1.3%, up from a 0.7% rise in the fourth quarter. Economists were expecting an increase of 0.8%.
Setting the tone for tech shares,
jumped 19.3% to $8.89, even though the company's loss widened and missed analysts' estimates. Investors were focusing on the wireless infrastructure maker's plans for aggressive cost reductions, including 7,000 more job cuts.
Among other companies reporting earnings,
said it swung to a profit in the first quarter following losses caused by an accounting change in the year-ago period. DuPont rose 1.5% to $42.37.
said first-quarter revenue rose 3% and earnings almost doubled, though they still missed estimates. Shares slid 1.5% to $20.99.
shares dipped 1% to $38.37, even though the company released first-quarter earnings that beat Wall Street estimates by 9 cents a share.
announced first-quarter earnings that beat Wall Street estimates by nearly 30 cents on a 23.3% jump in revenue. Shares rose 25% to $4.70.
released first-quarter earnings that beat Wall Street expectations by a penny, while affirming guidance for 2003. Shares rose 3.5% to $25.21.
Communications equipment maker
posted a first-quarter loss. Alcatel shares dropped 0.9% to $8.25.
said first-quarter revenue rose to $847 million, while earnings came in at 20 cents a share, 1 cent better than forecasts. McGraw-Hill gained 2% to $60.42.
said revenue shot up to $1.9 billion from $1.4 billion a year ago, while its loss narrowed to 19 cents a share, a substantially better result than was forecast by analysts. U.S. Steel rallied 5.1% to $14.30.
said its net loss narrowed in its fiscal second quarter. The company had restated results this month for the past three years. Shares dropped 16.2% to $3.30.
said its first-quarter earnings rose, excluding special items, with the help of recently acquired businesses. The company also boosted estimates for the full-year 2003 results. Northrop rose 3.2% to $89.29.
Shares of software maker
rose 11.4% to $38.74 after the company said fiscal third-quarter earnings will be at the higher end of previous analysts' estimates, despite lower expected revenue.
announced first-quarter earnings that matched Wall Street estimates on a 13% revenue increase. But the company warned that second-quarter earnings could be as much as 4 cents below current estimates. Shares fell 3.1% to $30.05.
Stocks of companies working on SARS vaccines soared, with
shares rising 7.9% to $2.72.
Overseas markets were mixed, with London's FTSE 100 closing down 0.3% at 3928 and Germany's Xetra DAX ending off 1.5% at 2909. In Asia, Japan's Nikkei closed 1.2% lower at 7607, reaching a two-decade low, while Hong Kong's Hang Seng gained 3.7% to 8744.
Treasuries were slightly lower, with the yield on the 10-year note up 2 basis points at 3.93%. Crude oil prices for June delivery was down to about $23 a barrel in London. The dollar was weaker against the yen but stronger against the euro.