By Jonathan Cheng
U.S. blue-chip stocks inched higher as investors weighed news
that Apple's earnings fell short of forecasts and responded to
mixed reports on the U.S. economy and earnings from other
companies.
The Dow Jones Industrial Average added 51 points, or 0.4%, to
11628. The Standard & Poor's 500-stock index was flat at 1226,
and the Nasdaq Composite shed 13 points, or 0.5%, to 2644.
Lifting stocks were a strong set of earnings from a number of
Dow components. Even so, the gains came mixed with caution: Much of
the advance was powered by the four so-called defensive sectors,
which are less sensitive to the broader economy--health care,
telecommunications, utilities and consumer staples.
Financial companies were also strong, after Morgan Stanley and
Travelers topped earnings expectations. Travelers gained 7% to lead
the Dow components after revenue topped expectations and the
insurer sounded an optimistic note on pricing. Morgan Stanley added
1.4% after recording a third-quarter profit, boosted by a huge
accounting gain, higher revenue in equities trading and more fees
from advisory work within investment banking.
"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.
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 4.4% after finishing at an all-time
high Tuesday. Other tech names were weak too. Hewlett-Packard
slipped 0.5% and Cisco Systems fell 1%.
Investors also continued to watch developments in Europe
closely. 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%.
Maris Ogg, president of Tower Bridge Advisors, said she saw
signs that investors were starting to brighten on the chances of a
solution in Europe, despite a bevy of reports and rumors that have
whipped markets around in recent weeks. "The path of least
resistance for the markets was down during the summer, and now
that's not so true," she said.
Gold futures edged lower to about $1,650 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 fell, nudging the yield on the benchmark 10-year note
higher to 2.1976%.
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 issuance of 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 4.5% after the
blue-chip semiconductor maker reported third-quarter results that
exceeded estimates, and provided an upbeat fourth-quarter revenue
outlook.
United Technologies edged down 0.2% after its third-quarter
results topped estimates.
Yahoo climbed 4.6% after the Internet company's third-quarter
earnings exceeded forecasts.
Abbott Laboratories rallied 2.1%. The medical products company
plans to separate into two publicly traded companies and reported
better-than-expected third-quarter earnings.
Checkpoint Systems 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.