An early pop fizzled Thursday, leaving stocks off slightly, but there was little reaction to a dismal report on new-home sales.
"People have grown accustomed to this [weak] data ... and are expecting it to be worse for a couple more quarters," said Steve Neimeth, portfolio manager at AIG SunAmerica.
"At some point, that housing number isn't going to be bad. At some point a financial company is going to say delinquencies are declining," Neimeth said. "It appears that there's a rotation going on out of commodities and energy and into early cyclicals such as financials in anticipation of a recovery in '09," Neimeth said.
Indeed, of 10 key S&P sector indexes, the financial-sector index was the only advancer, rising 1 percent. Energy stocks shed 2.4 percent and materials fell 1.6 percent.
In economic news, new-home sales tumbled 8.5 percent in March to a seasonally adjusted annual rate of 526,000, a 17-year low. Inventory swelled to an 11-month supply, the highest since September 1981. Initial jobless claims unexpectedly fell by 33,000last week. Durable-goods orders slipped 0.3 percent in March, but most of that was due to a slump in transportation, and a key gauge of corporate spending held steady.
Crude oil receded to around $117 as the dollar rose. The euro was trading at about $1.5729 against the dollar, compared with $1.5771 a day earlier.
On the earnings front, 3M was the biggest decliner on the Dow after the company, which makes Scotch tape and Post-it Notes, beat expectations -- albeit with a 29-percent drop in net income -- but said it sees more turbulence ahead for the flat-screen TV market. 3M makes coatings for LCD screens.
Ford posted an unexpected profit, led by strong results in Europe and South America and a narrowing loss in North America. The auto maker reported net income of $100 million, or 5 cents per share, compared with a net loss of $282 million, or 15 cents per share, a year earlier.
Motorola said its quarterly loss widened on cell phone sales that were at the low end of expectations, a signal that the broader telecom market faces tough times.
PepsiCo reported higher profit as strong international results helped offset weakness in the US resulting from the soft economy and rising commodity costs. Results were in line with analyst estimates.
Drug maker Bristol-Myers Squibb said its profit fell on higher restructuring costs and taxes, but adjusted results topped Wall Street forecasts.
In Europe, Credit Suisse reported a quarterly loss, with credit-related writedowns of more than $5 billion. But there were no new negative surprises in the report and shares managed to climb more than 3 percent, with investors betting that the bank was getting most of its bad news out of the way.
Apple reported earnings late Wednesday,blowing past earnings and sales expectations. Earnings came in at $1.16 a share on sales of $7.51 billion. Analysts had expected a profit of $1.07 a share on sales of $6.964 billion, according to Thomson Financial.
Despite the solid earnings, Apple, known for its conservative forecasts, issued a disappointing outlook for the current quarter.
Amazon.com also reported after the closing bell Wednesday. The online marketplace beat its earnings target and raised its sales forecast but cut its outlook for profit margins.
Starbucks on Wednesday warned of weaker-than-expected earningsfor the second quarter and full year, citing the "weakest economic environment" in its history. The news prompted one analst to say, "The wheels have really come off of this train."
Still to Come:
THURSDAY: New-home sales; Earnings from American Express and Microsoft
FRIDAY: Consumer sentiment; earnings from Ericsson, Honda
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