By Jonathan Cheng
U.S. blue-chip stocks edged higher as investors weighed a
surprise earnings shortfall from Apple Inc. (AAPL) and mixed U.S.
economic data and earnings news.
The Dow Jones Industrial Average added 14 points, or 0.1%, to
11592. The Standard & Poor's 500-stock index slipped two
points, or 0.2%, to 1224, and the Nasdaq Composite shed 19 points,
or 0.7%, to 2638.
Lifting stocks were a strong set of earnings from a number of
Dow components, including Travelers Cos. (TRV) and Intel Corp.
(INTC) Even so, the gains came mixed with caution, with much of the
advance powered by the four so-called defensive sectors that are
less sensitive to the broader economy--health care,
telecommunications, utilities and consumer staples.
Financials were also strong, after Morgan Stanley (MS) and
Travelers topped earnings expectations.
"We're down to reasonable valuation levels, and most companies
have shown that, even with small GDP growth, they're able to use
operating leverage and lower labor costs to generate reasonable
earnings growth," said Jerome Heppelmann, portfolio manager at
OMCAP Investors. "People have consistently underestimated
companies' ability to reset costs for a new slower growth
environment, and they've continually underestimated consumers'
willingness to continue spending even when their confidence is
low."
Weighing on the markets were technology stocks, after Apple's
fiscal fourth-quarter earnings and revenue fell short of
expectations. Sales of iPhones also disappointed. Apple's outlook
for the fiscal first quarter, however, was above Wall Street
forecasts. The stock slumped 4.1% after finishing at an all-time
high Tuesday. Other tech names were weak too. Hewlett-Packard Co.
(HPQ) fell 1.5% and Cisco Systems Inc. (CSCO) slipped 0.7%.
Investors also continued to watch developments in Europe
closely. In overseas markets, Europe closed broadly higher. The
Stoxx Europe 600 advanced 0.6% as continued optimism that an
agreement will be reached to expand the euro zone's bailout fund
overshadowed a two-notch downgrade of Spain's credit rating by
Moody's Investors Service.
Asian markets also finished mostly higher. Hong Kong's Hang Seng
Index rose 1.3% and Japan's Nikkei Stock Average added 0.4%.
Gold futures edged lower to about $1,640 an ounce. Crude-oil
futures were flat at below $89 a barrel. The U.S. dollar lost
ground against the euro and was flat against the yen. Demand for
Treasurys rose, nudging the yield on the benchmark 10-year note
lower to 2.1602%.
In economic news, consumer prices rose 0.3% in September, while
underlying inflation, which excludes energy and food costs, rose by
a tame 0.1%. Separately, U.S. home building jumped 15% in September
to its highest level in 17 months as apartment and condominium
construction surged. But building permits, a gauge of future
construction, fell 5.0% from a month earlier to the lowest level in
five months.
On Tuesday, the Dow erased earlier losses to close up 180
points, reaching a six-week high in intraday trading. The Dow is
now at the top of a "trading range" that has seen the blue-chip
index bounce between about 10700 and 11700.
In other corporate headlines, Intel rallied 3.9% after the
blue-chip semiconductor maker reported third-quarter results that
exceeded estimates, and provided an upbeat fourth-quarter revenue
outlook.
United Technologies (UTX) edged down 0.3% after third-quarter
results topped estimates, with growth across the aircraft-engine
and elevator maker's businesses.
Travelers gained 5.3% after beating revenue expectations and
sounding an optimistic note on pricing.
Yahoo Inc. (YHOO) climbed 4.1% after the Internet company's
third-quarter earnings exceeded forecasts.
Morgan Stanley added 1% after swinging to a third-quarter
profit, boosted by a huge accounting gain, higher revenue in
equities trading and more fees from advisory work within investment
banking.
Abbott Laboratories (ABT) rallied 2.7% after the medical
products company announced plans to separate into two publicly
traded companies and reported better-than-expected third-quarter
earnings.
Checkpoint Systems Inc. (CKP) tumbled 23%. The retail
systems-management company indicated its fiscal third-quarter and
full-year results will fall short of expectations, and announced a
restructuring plan that will affect more than 1,000 employees.
-By Jonathan Cheng