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The space shuttle Discovery launched successfully this time around. The performance of major stock indices, however, was much less grandiose. Positive earnings in the tech sector helped fuel gains for the

Nasdaq Composite


and the

S&P 500


but blue chips sank after disappointing earnings from


(DD) - Get DuPont de Nemours, Inc. Report


The semiconductor sector, often seen as a bellwether for the tech sector as a whole, did power the Nasdaq following strong earnings from

Texas Instruments

(TXN) - Get Texas Instruments Incorporated Report

after the close Monday. The group was also boosted by better-than-expected results from another chipmaker,

Taiwan Semiconductor

(TSM) - Get Taiwan Semiconductor Manufacturing Co. Ltd. Report

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. The Philadelphia Stock Exchange semiconductor index advanced 1.1%.

Strong chips helped the Nasdaq advance 9.25 points, or 0.4%, to 2175.99. That was just short of its 2005 high of 2179.7, which it breached on Friday. But if's

(AMZN) - Get, Inc. Report

after-hours action is any indication, new highs could be made Wednesday. Amazon's stock soared in the late session after the online retailer

projected strong sales growth.

The S&P 500 also rose, advancing 2.13 points, or 0.17%, to 1231.16.


Dow Jones Industrial Average


, however, remained weighed down by DuPont's earnings miss. The stock lost 6.5%, weighing heavily on the blue-chip average, which finished 16.71 points, or 0.16%, lower at 10,579.77. That countered a 3.1% gain by

General Motors

(GM) - Get General Motors Company Report

, which rose on news that its financial services unit plans to sell up to $55 billion worth of retail automotive contracts to

Bank of America

(BAC) - Get Bank of America Corp Report


Crude oil, which first headed lower, did a late-afternoon about-face and closed up 20 cents to $59.20. The turnaround in crude presumably contributed to some late-day weakness in shares; early in the day, shares struggled with news that high gasoline prices did hit consumer confidence in July.

Although the Nasdaq and S&P 500 hit multiyear highs last week (while the Russell 2000 hit an all-time high), second-quarter earnings season is -- so far, at least -- not providing much fuel for a push much higher.

But beyond the short-term swings on positive earnings news -- themselves subject to the expectations game -- there is little in the way of positive fundamentals to provide sustainable fuel for the market to move much higher, says Jack Ablin, chief investment officer with Harris Trust.

"Sure, it's a very good stat to have

70% of reporting S&P companies beating estimates so far," Ablin says. "But it's a micro positive in a macro shift towards lower growth rates

for the economy and profits. The best way to describe our position in this market is that we're hopelessly neutral."

Still, it's not as if second-quarter earnings have disappointed. Quite the contrary, earnings growth of nearly 10% is now expected for the quarter, compared with expectations of 7% before earnings season began.

And for the balance of the year, consensus earnings growth rates also have moved up, to 16.1% for the third quarter, compared with 15.7% two weeks ago, and 13.2% for the fourth quarter from 12.5% previously.

According to optimists such as Merrill Lynch equity trading strategist Mary Ann Bartels, all that is also doing a world of good for stock valuations.

The earnings yield -- or inverse of the price-to-earnings ratio -- for the S&P 500, which compares the yield of all S&P 500 companies over the past 12 months to the yield of the benchmark 10-year Treasury, now stands at an attractive 0.8%. The spread turned positive early this year for the first time since October 1995, according to Bartels.

Yet that's still not very inspiring for the market. Perhaps, it's because the yield spread doesn't seem like it's going to stay so positive for stocks much longer. The 10-year Treasury has been under pressure over the past three weeks as the

Federal Reserve

indicated it would continue lifting interest rates and China's yuan revaluation is adding to the pressure. The yield has moved up to over 4.20% from 3.90% in late June.

On Tuesday, however, U.S. Treasuries rose -- with the benchmark 10-year bond gaining 5/32 and its yield falling to 4.23% -- after China

dampened expectations that it would follow last week's first step to revalue the yuan with further moves. Bonds have been under pressure since the announcement on expectations that China's purchases of dollars to maintain the yuan's peg will eventually lessen, and so will its recycling of excess dollars into U.S. Treasuries.

Furthermore, the S&P 500's earnings yield of 5% is just about where Ablin expected it for the year, and now "valuations are neutral enough so that the bottom is not going to fall out from under the market's feet."

That level of support may be comforting but it's far from inspiring for most investors, still addicted to the sharp gains of the tech-led boom 1990s. High returns, of course, have been confined to other areas. Ablin chose to go underweight bonds at the beginning of the year and chose commodities.

That strategy at least promises to have long-term legs thanks to China's move toward revaluing the yuan. China is the world's largest importer of commodities, and a strong currency will help it gobble up its daily needs at cheaper levels, which is where Treasuries also appear poised to continue moving.

To view Gregg Greenberg's video take on today's market, click here


In keeping with TSC's editorial policy, Godt doesn't own or short individual stocks. He also doesn't invest in hedge funds or other private investment partnerships. He appreciates your feedback;

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