Updated from 4:15 p.m. EDTStocks finished mixed Tuesday as weakness was widespread, particularly among tech shares, keeping the broader averages from mounting a sustainable move higher. The Dow Jones Industrial Average finished with a gain for just the second time in the last seven days, adding 14.41 points, or 0.14%, to 10,253.17. Still, that was well below the day's high at 10,313. The S&P 500 lost 2.46 points, or 0.21%, to 1184.87, and the Nasdaq Composite fell 17.83 points, or 0.86%, at 2061.09. About 2.27 billion shares traded on the New York Stock Exchange, with decliners beating advancers by a 5-to-3 margin. Trading volume on the Nasdaq was 1.82 billion shares, and losers beat winners 7 to 3. Elsewhere, the 10-year Treasury was down 8/32 in price to yield 4.39%. The dollar rose against the euro and fell against the yen. Oil spiked after falling in six of the last seven sessions. The November crude contract closed up $1.73 to $63.53 a barrel in Nymex floor trading, its highest level in a week. Tuesday's gain came even as Europe's International Energy Agency ratcheted down its estimate for worldwide demand growth for 2006 by about 100,000 barrels a day. Among the primary culprits behind the Nasdaq's slide were softness in the Philadelphia Semiconductor Sector Index, down 1.7%, and the Amex Networking Index, off 1.6%. The computer hardware sector helped limit the decline by tacking on 0.2% ahead of Apple's ( AAPL) quarterly report, scheduled for after the close. With profit reports about to start flooding the market, J.P. Morgan said it believes corporate earnings could miss the 18% EPS growth target for the S&P 500, ending a streak of 10 consecutive quarters of beating estimates. The firm believes energy may be the only sector to top analysts' expectations for earnings growth in the third quarter. "We've had 13 quarters in a row of double-digit growth, which is good news," said Michael Sheldon, chief market analyst with Spencer Clarke LLC. "The more difficult news is that, looking at 2006, the economy is likely to slow. This will lead us to lower profit growth for next year. Will the Fed win the battle in subduing inflation at the cost of slowing the economy enough, leading to a weaker stock market?" Regarding the economy, the policymaking Federal Open Market Committee released the minutes from its Sept. 20 meeting. At that meeting, the FOMC raised its federal funds target rate by a quarter-point to 3.75%. However, "some sentiment was expressed to consider changes to forward-looking aspects of the statement at upcoming meetings, in part because of the considerable reduction in monetary policy accommodation that had already been accomplished," the minutes indicated.
"Participants' concerns about inflation prospects generally had increased over the intermeeting period." the minutes read. "The surge in energy prices, in particular, was boosting overall inflation, and some of that increase would probably pass through for a time into core prices. This posed the risk that there could be a more persistent influence on inflation, should inflation expectations rise." Fed Governor Mark W. Olson voted for no change in the fed funds target in the wake of Hurricane Katrina. However, since the last FOMC meeting, a number of other Fed officials have made hawkish comments, suggesting the credit-tightening campaign isn't over. Traders started the day in the mood to buy as corporate profits moved to the forefront of their attention after a solid report from Genentech ( DNA). After the close Monday, the company reported a 56% surge in third-quarter earnings and boosted its full-year guidance. The biotech giant is harvesting major revenue gains from its portfolio of cancer drugs, particularly Avastin, for which sales jumped 78% to $325.2 million in the quarter. Before a litigation charge, Genentech earned $383.8 million, or 35 cents a share, in the quarter, beating analysts consensus estimate by a nickel. The company also predicted full-year earnings will rise 50% from 2004, well ahead of its previous forecast of 35% profit growth. Genentech rose by $2.59, or 3.2%, to $84.59. Also reporting late Monday was Alcoa ( AA), which said third-quarter earnings rose 2% from a year ago to $289 million, or 33 cents a share, on sales of $6.57 billion. Analysts wanted 29 cents a share on sales of $6.61 billion. Shares of Alcoa gained 19 cents, or 0.8%, to $22.85. On the docket Tuesday is Apple, which is expected to post earnings of 37 cents a share on sales of $3.73 billion for its fourth quarter. The computer and iPod maker's stock is up 50% this year and trades for about 30 times next year's estimated earnings. Apple, which reports after the bell, was higher by $1.22, or 2.4%, to close at $51.59.
"This earnings season is the weakest season of the year for prices," said Phillip Roth, chief technical market analyst with Miller Tabak. "The market is in a correction and it should last into November. With that background, it tends to magnify poor results and overlook positives." Stocks fell on Monday as a 10% decline in General Motors ( GM) sank blue chips. Former GM unit Delphi ( DPH) filed for bankruptcy last Saturday, and the company warned of catastrophic ramifications it's unable to win major wage concessions. "The impact of a collapse could potentially injure most of the world's automakers and perhaps fatally wound General Motors," Delphi CEO Steve Miller told the Financial Times. Delphi shares were halted by the New York Stock Exchange after the company opened higher by 3 cents, or 9.1%, to 36 cents. GM gained 94 cents, or 3.7%, to $26.42. Meanwhile, the fight over Time Warner's ( TWX) future intensified Tuesday with activist investor Carl Icahn lambasting current executives in a letter filed with the Securities and Exchange Commission. Icahn, who along with three other investors owns 2.6% of the company's shares, said Time Warner "has become bloated due to lack of oversight by the board and senior management" and reiterated a call for a $20 billion share buyback. Time Warner shares were down 21 cents, or 1.2%, to finish at $17.80. RealNetworks ( RNWK) saw interest Tuesday after The Wall Street Journal reported that Microsoft ( MSFT) is nearing an antitrust settlement with the software maker that would pay it $750 million. RealNetworks previously accused Microsoft of using its Windows operating system to hinder sales of its media player to personal computer users.
RealNetworks added $1.96, or 34.2%, to $7.70. Microsoft lost 5 cents, or 0.2%, to $24.41. Late Monday, eBay ( EBAY) said it will buy VeriSign's ( VRSN) payment processing business for $370 million. eBay plans to merge the operation with its PayPal unit to create a broader e-commerce payment service. eBay closed unchanged at $40.46 after a choppy session for the stock. VeriSign rose 17 cents, or 0.9%, to $20.21. NCR ( NCR) said it expects third-quarter earnings between $1.16 to $1.18 a share. Excluding a gain from a tax settlement, earnings are expected between 43 cents and 45 cents, greater than the company's previous outlook of 28 cents to 33 cents a share. The company also its raised full-year earnings projection. NCR climbed $1.29, or 4.2%, to $32.24. After the bell Monday, Skyworks Solutions ( SWKS) lowered its fourth-quarter revenue target to $190 million from $194 million after a one-time payment to a customer, as well as a demand shift the company could not support. Skyworks dropped $1.47, or 22.2%, to $5.14. In ratings moves, Citigroup upgraded video-game maker Electronic Arts ( ERTS) to buy from hold, citing valuation. The firm believes that the launch of Microsoft's Xbox 360 will benefit the stock, despite the risk of negative guidance revisions. Electronic Arts gained $1.51, or 2.9%, to $52.86. UBS increased its stock price target for McDonald's ( MCD) to $43 from $37, believing it will spin off company-owned restaurants, creating higher shareholder value. McDonald's ended unchanged at $32.34. Overseas markets were higher, with London's FTSE 100 adding 0.1% to 5380 and Germany's Xetra DAX gaining 0.2% to 5032. In Asia, Japan's Nikkei rallied 2.5% to 13,557 overnight, while Hong Kong's Hang Seng was unchanged at 14,899.