Updated from 4:03 p.m. EST
Stocks finished mostly higher on Tuesday, building on Monday's sharp gains, but investors were less than impressed over a sharp rise in consumer confidence and a much-larger-than-expected upward revision to third-quarter GDP.
Dow Jones Industrial Average
rose 16.15 points, or 0.2%, to 9763.94, the
rose 1.81 points, or 0.2%, to 1053.89, and the
declined 4.10 points, or 0.2%, to 1943.04. Late-session buying helped the Dow and S&P advance for the third day in a row, but the Nasdaq could not sustain gains.
Volume on the
New York Stock Exchange
was 1.33 billion shares, while 1.83 billion shares exchanged hands on the Nasdaq. Interestingly, advancers outpaced decliners on the NYSE at more than 2 to 1, and on the Nasdaq at about 19 to 13.
"The economic news was very good this morning. I was surprised to see an initial selloff," said Ray Hawkins, a trader at J.P. Morgan. "With the holiday approaching, we are not seeing a ton of business, but a lot of program buying kicked in when stocks failed to fall further."
On the economic front, third-quarter GDP was revised to an annualized growth rate of 8.2% from the initial estimate of 7.2%; economists had expected growth to be revised to 7.6%.
In addition, the Conference Board consumer confidence number was higher than expected at 91.7 in November vs. the consensus expectation of 85.0; this was a strong improvement from 81.7 last month.
Market reaction to both releases was initially muted; equities failed to build a meaningful rally until late in the day, and Treasury yields fell sharply. This isn't surprising, as the markets already knew that unprecedented monetary and fiscal stimulus had combined to push growth and spending higher, and the GDP revision is essentially a backward-looking indicator. Concern has shifted to whether such robust activity is sustainable.
"The morning's data was generally negative for the Treasury market, but strong GDP growth is old news," said John Canavan, Treasury market analyst for Stone & McCarthy Research. "The focus has shifted to the economy's follow-through in the fourth quarter and 2004."
The 10-year U.S. Treasury bond traded up 12/32, its yield falling 4.18%.
Canavan was "surprised that the Treasury market held in so well following the consumer confidence number, but managers needed to do month-end buying to rebalance portfolios relative to their benchmarks."
The equity markets have gone much further in pricing in a recovery than the bond markets, and moving forward will require even more impressive results to spark another advance. The continued accommodative stance of monetary policy and dovish comments by a slew of
officials, have kept a ceiling on Treasury yields.
"The economy and earnings remain strong, and stocks should be a little bit higher, but it looks like a little bit of a tired bull," said David Briggs, head of stock trading at Federated Investors. "Stocks will likely trade sideways until fourth-quarter earnings season begins in January, and increased supply from IPOs could put some additional pressure on the market."
A small group of economists have even expressed concern that enormous third-quarter growth may actually detract from activity in subsequent quarters.
"All other things equal, the larger upward adjustment to Q3 inventories would reduce our estimate of Q4 GDP to about 3.5% from the 3.75% we had previously estimated," Morgan Stanley U.S. economist David Greenlaw said in a note to clients.
The dollar weakened slightly vs. the Japanese yen and the euro, but held up well following Monday's big gain after hitting a new record low against the European currency last week.
Crude oil futures rose 0.2% to $29.84 per barrel, after collapsing more than 5% yesterday. Gold futures fell 0.1% to $392 an ounce.
Also on the economic calendar, existing-home sales fell by 4.9% to 6.35 million; economists had expected a smaller decline to 6.53 million. Low mortgage rates continue to support the housing market, which has driven the economy during the past three years.
In company news,
said it will sell its finance subsidiary to a unit of
, for $1.25 billion in cash. Shares of Washington Mutual fell $1.60, or 3.4%, to $44.95.
J.P. Morgan upgraded a number of brokers, citing improving trends in investment banking because of the strengthening economy. The firm upgraded
to overweight from neutral, and
to neutral from underweight. Goldman shares rose $1.33, or 1.4%, to $96.25, while Morgan Stanley improved 87 cents, or 1.6%, to $55.10.
said it will buy the R.E. Ginna Nuclear Power Plant located in Rochester, N.Y., increasing its stable of plants to three. The company's shares rose 48 cents, or 1.3%, to $36.60.
Meanwhile, shares of seismic-exploration company
fell after the company reported a first-quarter loss after the bell Monday. The stock jumped 54 cents, or 6%, at $9.49.
Overseas markets finished higher. London's FTSE 100 rose 0.1% to 4389 and Germany's Xetra DAX improved 0.1% to 3,733. In Asia, the Nikkei rose 1.1%, closing at 9960, while the Hang Seng was up 1.4% at 12,008.
Wednesday's economic schedule is packed as investors look ahead to the Thanksgiving holiday. Highlights include personal income, personal spending and durable goods orders. New-home sales are expected to fall slightly to 1.138 million, but should continue to lend support to the recovery. In addition, initial jobless claims for the week ending Nov. 22 are expected to rise by 5,000 to 360,000, but will attempt to make it eight consecutive weeks under the 400,000 level necessary for labor market improvement.