Updated from 4:25 p.m. EDTTech stocks overcame an afternoon slip and closed higher Wednesday, but blue chips went out mixed following a back-and-forth session in New York. The Nasdaq Composite was the best performer, rising 28.76 points, or 1.04%, to 2792.67, fueled by strong earnings reports from Intel ( INTC) and Yahoo! ( YHOO). At the same time, the Dow Jones Industrial Average lost 20.40 points, or 0.15%, to 13,892.54. The S&P 500 added 2.71 points, or 0.18%, to 1541.24. Traders saw an early rally gradually give way to selling pressure that hit the hardest following the release of the Federal Reserve's beige book. According to the document, economic activity continued to expand in most of the nation's 12 districts at a modest or moderate pace in September and early October. Growth slowed, however, in the Cleveland, Kansas City, Richmond, Dallas and San Francisco regions. The report said that manufacturing and service sectors saw growth weaken due to the weak housing sector and recent credit turmoil. "Factory activity continued to expand, but reports suggested that growth has been dampened by declining output of products used in home construction," the survey read. "Home sales continued to fall or increased more slowly in most
"We are more interested in permits, which are less erratic than starts and which tanked," said Ian Shepherdson, chief economist with High Frequency Economics. "This is just about exactly half the peak summer 2005 level but there is no end in sight to the drop. The housing hit is intensifying." The beige book completely reversed early gains in tech stocks, but traders eventually recovered and resumed the rally that stemmed from solid earnings reports following the previous session. Intel handily beat estimates and raised its outlook for the year, and Yahoo! topped both the top- and bottom-line estimates. Intel climbed 4.9% to $26.72, and Yahoo! jumped 8% to finish the day at $28.82. Also in the prior afternoon, IBM ( IBM) reported earnings that beat the Thomson First Call estimate by a penny. However, shares of IBM slumped 3.2% to close at $115.78 after the company said sales of computer servers and hardware declined. Before the new session began, four other Dow components were out with better-than-expected earnings. JPMorgan Chase ( JPM) and Altria ( MO) topped Wall Street's earnings-per-share estimates, as did Coca Cola ( KO) and United Technologies ( UTX). JPMorgan ended up 2.8% at $46.37, Coke advanced 2.3% to $59.09, and Altria tacked on 0.3% to $70.98. United Technologies, though, slid 3.6% to $76.80 after the company said that 2008 could be challenging.
"The market firmed up in the last hour of trading instead of fading, which is encouraging," said Larry Wachtel, senior market analyst with Wachovia Securities. "This was the first big day of earnings for the third quarter and we got a lot of bad news on housing. All in all, it could've been worse, given the fact the markets were looking sour." Breadth was weak Wednesday. On the New York Stock Exchange 2.64 billion shares changed hands, as decliners topped advancers by a 6-to-5 margin. Volume on the Nasdaq reached 2.31 billion shares, with losers barely edging out winners nearly 15 to 14. The chip sector was the best performer of the session thanks to Intel, with the Philadelphia Semiconductor Sector Index up 1.7%. The Dow Jones Transportation Index and the Amex Airline Index were winners as well, tacking on 1% each. Among the worst-declining sectors, the Philadelphia Gold & Silver Index tumbled 1.8%. Energy-related indices also gave up ground, with the Philadelphia Oil Service Sector Index down 1.3% and the Amex Oil Index lower by 0.8%. Treasury prices raced higher as investors ran to so-called safe havens. The 10-year note surged 24/32 in price, cutting the yield to 4.55%. The 30-year bond rose 1-13/32 in price to yield 4.81%. "The bond market is telling us that a big slowdown could be coming," said Paul Mendelsohn, chief investment strategist with Windham Financial.
Oil was also a factor, setting new record highs despite a bearish inventory report for prices from the Energy Department. The data showed strong builds in crude, gas and distillate inventories last week and a decline in refinery utilization. Crude prices marched as high as $89 a barrel for the first time ever, but pared gains and finished down 21 cents at $87.12 a barrel. In the prior session, record oil prices, along with worries about housing and weak earnings, sank the major averages. The Dow fell 71.86 points, or 0.5%, to 13,913, and the S&P 500 dropped 10.18 points, or 0.66%, to 1538.53. The Nasdaq surrendered 16.14 points, or 0.58%, at 2763.91. Aside from the big tech names and the Dow components, several other companies were out with profit reports in the new trading day. Abbott Laboratories ( ABT), Gannett ( GCI) and Northern Trust ( NTRS) all topped estimates. In addition to the earnings flood, traders had to contend the latest read on inflationary pressures. The Labor Department said its consumer price index rose 0.3% last month, slightly above economists' expectation. On the bright side, the core number, which excludes food and energy, was in line with consensus predictions of a 0.2% increase. "Inflation remains modest, despite rising crude oil prices," said Peter Morici, a professor at the University of Maryland School of Business and former chief economist at the U.S. International Trade Commission. "Throughout the supply chain, from oil refineries to florists, businesses face strong buyer resistance to the pass-through of higher oil and material prices."
Following the data, the dollar was weaker against other major currencies except for the Australian dollar. Overseas markets were mostly higher. In Europe, London's FTSE 100 was up 1%, and Germany's Xetra Dax was climbed 0.3%. In Asia, Hong Kong's Hang Seng rallied 1.2%, while Japan's Nikkei 225 fell 1.1%. The earnings parade marches on Thursday, with reports expected from Bank of America ( BAC) and Pfizer ( PFE) before the bell, among others. After the bell, Google ( GOOG), Advanced Micro Devices ( AMD) and SanDisk ( SNDK) take the stage.