Stocks Finish Flat, Halting Three-Day Rally

NEW YORK ( TheStreet) -- U.S. stocks traded sideways Wednesday, pausing after a three-day rally as investors brace for economic reports from China and digest divergent views within the Federal Reserve on monetary stimulus.

Federal Reserve Bank of Dallas President Richard Fisher said in a Bloomberg TV interview Wednesday that he thinks more stimulus would risk "overburdening" central banks, just after Federal Reserve Bank of Boston President Eric Rosengren said otherwise.

The Dow Jones Industrial Average closed up 7 points, or 0.1%, at 13,176. There were 21 of 30 companies that traded higher on the blue-chip index.

McDonald's ( MCD), United Technologies ( UTX) and Verizon ( VZ) led the decliners, while Hewlett-Packard ( HPQ), Walt Disney ( DIS), Wal-Mart ( WMT) and Alcoa ( AA) gained.

Hewlett-Packard shares climbed 2.3% after the top PC maker increased its third-quarter earnings forecast.

McDonald's shed 1.6%. The fast-food giant reported flat July global same-store sales amid a decline in revenue in both the U.S. and Europe as well as the critical growth markets of the Asia Pacific, Middle East and Africa. McDonald's succumbed to global economic woes following years of solid performance during the recession.

Walt Disney shares finished 1.4% higher after the media and entertainment conglomerate posted better-than-expected earnings but came up short of analysts' estimates on the top line.

The company reported after Tuesday's closing bell earnings of $1.83 billion, or $1.01 a share, in its fiscal third quarter ended in July on revenue of $11.09 billion. Analysts were expecting a profit of 93 cents a share on revenue of $11.31 billion.

Earnings were driven, in part, from strong ticket sales to movies like The Avengers.

The S&P 500 traded sideways at 1402 and the Nasdaq closed down 5 points at 3,011.

The stronger sectors in the broad market were basic materials, energy and financials. Conglomerates, utilities and transportation were among the weaker sectors.

The Hong Kong Hang Seng index finished flat and the Nikkei in Japan closed up 0.88% as investors awaited a batch of China data later this week.

The spate of China data this week includes inflation, industrial production, retail sales and fixed asset investment on Thursday and trade data on Friday.

"China's top authorities two weeks ago reaffirmed that growth remains their highest priority," noted Qinwei Wang, China economist for Capital Economics.

"Local governments are responding by unveiling stimulus plans, which is another reason to expect growth to pick up over the next few quarters. That said, we still expect China's economic recovery to be gradual rather than sharp."

Both the FTSE in London and the DAX in Germany finished flat.

A spate of weak reports came out of Europe Wednesday as the Bank of England reduced its outlook on the U.K.'s economy, the Bank of France warned that the French economy may slide into a shallow recession in the third quarter, Dutch bank ING ( ING) reported losses related to its exposure to Spain, Greece's rating outlook was slashed by Standard & Poor's and German industrial production in June declined a bit more than expected.

Earlier Wednesday, Spanish 10-year yields popped above 7%.

"The latest German industrial production data round off what has been a pretty torrid quarter for the euro area," said James Nixon, chief European economist at Societe Generale.

September crude oil futures settled down 32 cents at $93.35 a barrel and December gold futures settled up $3.20 at $1,616 an ounce.

The benchmark 10-year Treasury was rising 5/32, diluting the yield to 1.648%. The greenback was up 0.1%, according to the dollar index.

The Labor Department said before the markets opened that preliminary second-quarter nonfarm productivity rose at a 1.6% annual rate and unit labor costs increased at a 1.7% rate. Economists surveyed by Reuters had expected productivity to rise by 1.3% and unit labor costs to increase by 0.6%.

On the corporate front, Dean Foods ( DF) soared 41% after the dairy company reported bigger-than-anticipated quarterly earnings and announced a U.S. initial public offering for its WhiteWave Foods unit. ( PCLN), the online travel reservation company, provided investors with an underwhelming outlook after Tuesday's close of trading.

Priceline said it expects non-GAAP earnings of $11.10 to $12.10 for the third quarter ending in September, well below the current Wall Street consensus estimate for a profit of $12.76 a share. The company said its outlook "reflects an assumption that economic conditions in Europe will further deteriorate." Shares plunged 17%.

Macy's ( M) posted a 16% gain in second-quarter net income and earnings per share of 67 cents on revenue of $6.12 billion. Analysts, on average, were expecting second-quarter earnings of 64 cents a share on sales of $6.12 billion. Shares gained 2.7%.

Jiangling Motors, the Chinese light commercial vehicle maker that is 30%-owned by Ford ( F), plans to buy Taiyuan Changan Heavy Truck Co..

China is the world's largest market for heavy trucks. It's Ford's first entry into the market.Ford shares closed up 0.4%.

-- Written by Andrea Tse in New York.

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