NEW YORK ( TheStreet) -- Stocks staged a smart recovery late in Tuesday's session to finish right around the flatline ahead of President Obama's State of the Union address tonight. The Dow Jones Industrial Average finished 3 points, or 0.03%, lower at 11,977, after dropping more than 80 points earlier in the session to 11,898. The S&P 500 settled with an incremental gain at 1291, bouncing roughly 10 points off its session-low. The Nasdaq Composite managed to add nearly 2 points, or 0.06%, to close at 2719. Wal-Mart ( WMT), Verizon ( VZ) and Cisco Systems ( CSCO) led the Dow higher, while American Express ( AXP), Bank of America ( BAC) and Johnson & Johnson ( JNJ) were among the blue-chip index's bigger losers. Breadth within the Dow was negative with 17 of its 30 components moving lower. Stocks were in the red for most of the trading session Tuesday as investors digested mixed reports from a number of Dow components. Verizon
missed expectations but raised profit and sales targets driven largely by wireless and high hopes for its business with Apple's ( AAPL) iPhone. Johnson & Johnson met profit forecasts but fell short of revenue estimates. AmEx, which reported after Monday's closing bell, also disappointed Wall Street. 3M ( MMM) topped expectations despite a slight dip in quarterly profits and raised its sales outlook for 2011. DuPont ( DD) and Travelers ( TRV) also beat analyst views. Overall, market breadth was even by the end of the trading session, with about 49% of stocks on the New York Stock Exchange losing ground, and 48% finishing in positive territory. Consumer cyclicals and telecom showed the most gains while basic materials was the weakest sector. Early Tuesday, the Conference Board said consumer confidence jumped to 60.6 in January -- an eight-month high -- from 53.3 in December. The level far exceeded economists' expectations for a January reading of 53.5, according to Briefing.com.
"The international market is definitely playing a bigger role for larger U.S. companies, and those are the companies that are feeling a pinch as the global market begins to slow in some areas," said Daniel Penrod, senior industry analyst for the California & Nevada Credit Union Leagues, about some of the recent earnings misses. "The hope had been that the international market would pull the U.S. through but we're seeing less stability than we previously thought."
"Despite the earnings questions and the weakness in some areas, the fact that there's confidence back on the Street is a very positive sign, and we're starting to see with the job market slowly improving, that Main Street is starting to really feel the positive impact of the growth that we've experienced over the last 12 months," said Penrod, pointing to January's strong consumer confidence reading.
Home price data, however, showed continued sluggishness. The S&P's Case-Shiller 20-city home price index declined 1.6% in November, after dipping by 0.84% in October. The level just missed the drop of 1.5% that economists expected, according to Briefing.com. The Federal Housing Finance Agency's home price index was unchanged in November, after rising 0.7% in October. Members of the Federal Reserve's policy-making arm convene Tuesday for a two-day meeting that will conclude with a rate decision statement on Wednesday afternoon. Although no one is anticipating a change in the key interest rate, the market is eager to see whether encouraging economic data will be reflected in the committee's statement. Market watchers will also be interested in what the committee says regarding future plans for its quantitative easing program. Penrod expects the Fed's statement on Wednesday to focus on the mix of recent economic data. "We're seeing income confidence and non-farm payroll improvements. It's been slow and it's been fairly steady but we're still seeing some pain in the housing market. Even with rates on the floor, we're seeing that rates are no longer a demand driver, so the Fed will likely stay their course with their asset purchase program," he said. Investors are also looking ahead to President Obama's State of the Union address at 9 p.m. EST, where he is expected to focus on the economy and improving job creation "President Obama's State of the Union address this week is likely to be more pro-business in contrast to the anti-business tone of last year's address," wrote Jeff Kelintop, chief market strategist of LPL Financial, in his preview of the address. "This may provide a more favorable backdrop for the stock and bond markets as we head into February--historically, one of the weakest months of the year for the S&P 500 with an average monthly loss of -0.3% since the start of the index in 1927." Steel stocks were rising after U.S. Steel ( X) and AK Steel ( AKS) delivered disappointing results but raised their outlooks for 2011. U.S. Steel reported a wider-than-expected loss of $1.74 a share, compared with the loss of $1.11 a share that Wall Street forecast. The company managed to beat sales expectations with revenue that rose 28% to $4.3 billion. Analysts had projected sales of $4.2 billion. The stock rose 5.2% at $57.30. Rival AK Steel saw its shares soar 7.7% to $15.57. Harley-Davidson ( HOG) posted a loss of 18 cents a share and said sales rose 20% to $917.1 million. Analysts had projected a larger loss of 30 cents a share on lower sales of $863 million. The stock climbed 8% to $39.43.
Baker Hughes ( BHI) surged 6.5% higher to $62.32 after the oilfield servicer posted adjusted earnings of 84 cents a share, topping Wall Street's estimates by 19 cents. Shares of Tellabs ( TLAB) tumbled 20% to $5.69 after it warned that first quarter profits would miss expectations. The company reported disappointing fourth quarter results, posting an unexpected loss of $11 million or 3 cents per share as it lost market share to rivals. After the bell, Yahoo! ( YHOO) said
its fourth-quarter profit rose to $312 million, or 24 cents per share, 2 cents ahead of Wall Street's consensus view. But revenue fell short of estimates, and the stock was shedding 3% in aftermarket trades. Juniper Networks ( JNPR) saw its shares fall 1% in extended action after it beat estimates but issued a weak outlook for the first quarter. In commodity markets, the March crude oil contract shed $1.68 to settle at $86.19 a barrel. The February gold contract plunged $12.20 to settle at $1,332.20 an ounce. The dollar was trading weak against a basket of currencies with the dollar index down by 0.1%. The benchmark 10-year Treasury rose 19/32, diluting the yield to 3.330%. . Overseas, European shares slipped after the U.K.'s Office of National Statistics said the economy contracted 0.5% in the three months through December, compared with growth of 0.7% in the previous three-month period. London's FTSE lost 0.4% and the DAX in Frankfurt finished 0.1% lower. Earlier, Hong Kong's Hang Seng slipped 0.05% while Japan's Nikkei rose 1.2%. --Written by Melinda Peer and Shanthi Bharatwaj in New York.