Updated from 4:17 p.m. ESTStocks ticked higher Tuesday, but investors weren't inclined to make big bets with the start of a two-day Federal Reserve meeting, more blue-chip earnings and surging oil prices to consider. The Dow Jones Industrial Average added 32.53 points, or 0.26%, to 12,523.31, and the Nasdaq Composite was up 7.55 points, or 0.31%, at 2448.64. The S&P 500 tacked on 8.20 points, or 0.58%, at 1428.82. The Dow benefited from gains of 1.8% in Hewlett-Packard ( HPQ) and Intel ( INTC). The Nasdaq got help from Activision ( ATVI) and Juniper Networks ( JNPR), which each advanced 2.8%. Roughly 2.73 billion shares changed hands on the New York Stock Exchange. Advancers beat decliners by a 12-to-5 margin. Volume on the Nasdaq reached nearly 1.84 billion shares, with winners outpacing losers 3 to 2. Key action was taking place in Washington, D.C., where the Fed gathered for the first day of a policy meeting. The central bank will meet again Wednesday and release its policy statement at 2:15 p.m. EST. No change is expected in the target fed funds rate for the fifth straight time. Even so, the Fed's comments on the economy will factor heavily in traders' plans, at least for the near future. James Park, managing director with Rodman & Renshaw, that the conundrum investors face in evaluating the Fed's moves is finding the balance of earnings expansion weighed against economic growth. "The environment has been fairly encouraging," said Park. "Technology earnings shook a lot of confidence out of investors, but when you're seeing steady economic data investors should feel somewhat confident following the Fed announcement tomorrow."
Many are hoping to see a rate cut at some point this year, but the Fed has been noncommittal, saying it will rely on incoming data to determine whether the economy is slowing enough to drop short-term rates. "Earnings reports should be supporting a bullish sentiment, but the question is whether the Fed gives us the same rhetoric or not," said Peter Cardillo, chief market economist with Avalon Partners. "With a Fed meeting and a slew of economic data the rest of the week, we'll be cautious. Fears of inflation will be the stumbling block." On the commodities front, oil prices jumped after a Saudi oil official said his country is committed to implementing production cuts in an effort to prop up crude. Futures added $2.96 to end at $56.97 a barrel. On Monday, crude slid $1.41 to $54.01. Natural gas also surged, finishing up 80 cents to $7.74 per million British thermal units. Gold was higher by $1 to close at $644.20 an ounce, and silver tacked on 12 cents at $13.37 an ounce. Turning to earnings, three components of the Dow were reporting their quarterly results. At 3M ( MMM), earnings missed analysts' fourth-quarter estimates, and its projections were on the light side. Procter & Gamble ( PG) edged past quarterly estimates and offered in-line guidance. 3M shed $4.26, or 5.4%, to $74.70. P&G lost 29 cents, or 0.5%, to $64.59. Meanwhile, drugmaker Merck ( MRK) posted a fourth-quarter profit of $473.9 million, or 22 cents a share, down 58% from a year ago. Excluding items, the company earned 50 cents a share, matching estimates. Quarterly revenue of $6.04 billion exceeded expectations. At the same time, Merck reaffirmed its full-year 2007 guidance, but analysts' estimates have climbed since last month when the company offered the same forecast. Merck is anticipating a profit of $2.51 to $2.59 a share for 2007, whereas Wall Street's consensus is now $2.61. Shares were off 60 cents, or 1.3%, finishing at $44.91.
In other earnings, UPS ( UPS) reported fourth-quarter income of $1.13 billion, or $1.04 a share, up 7.5% from the year-ago quarter. Results matched expectations. However, full-year guidance fell short of analysts' forecasts, and UPS sank 95 cents, or 1.3%, to $72.70. JetBlue ( JBLU) said it swung to a fourth-quarter profit of $17 million, or 10 cents a share, compared with a year-ago loss of $42 million, or 25 cents a share. Excluding items, the airline earned 9 cents a share, falling short of the Thomson First Call consensus of 11 cents a share. JetBlue dropped 65 cents, or 4.5% to $13.85. Among analyst moves, JPMorgan upgraded Starbucks ( SBUX) to overweight from neutral, and Goldman Sachs boosted its rating for RadioShack ( RSH) to buy from neutral. Starbucks, which reports earnings Wednesday, finished unchanged at $34.56. RadioShack rose $1.04, or 5%, to $21.86. Elsewhere, UBS raised its stock price target for retail giant Target ( TGT) to $78 from $70, and Banc of America Securities increased its price target for Time Warner ( TWX) to $25 from $24 and Disney ( DIS) to $34 from $32. Target gained 0.6% to $60.44. Time Warner climbed 1.2% to $22.04. Disney ended up 1% to $35.04. In the day's only economic release, the Conference Board said that consumer confidence rose to 110.3 in January, the highest reading in nearly five years. The data came in slightly higher than December's revised reading of 110.0, and was above analysts' estimates for 109.5.
Ian Shepherdson, chief economist with High Frequency Economics, said the rise wasn't a surprise. "The increase in expectations was largely a lagged response to the plunge in gasoline prices in the fall," he said. However, Shepherdson warned that gas prices "have now stopped falling so there will likely be no further upshift in expectations." Treasuries were rising following the report. The benchmark 10-year note was up 4/32 to yield 4.88%, and the 30-year bond was higher by 8/32, yielding 4.98%. Equities were mostly stronger overseas. Frankfurt's Xetra DAX was tacking on 0.9% at 6788, while London's FTSE was unchanged at 6242. Tokyo's Nikkei rose 0.1% overnight to 17,490, and Hong Kong's Hang Seng gained 1.1% to 20,460.