The Dow industrials popped 25 points Wednesday after news of another Federal Reserve rate cut but gains quickly evaporated as interest-rate sensitive stocks declined.
Retail, housing and tech stocks retreated, while commodities stocks increased ahead of ExxonMobil's earnings on Thursday.
The Fed lowered its target for the federal-funds rateby a quarter percentage point to 2 percent and cut the discount rate by the same amount. It was the central bank's fourth rate cut this year and the seventh since the current cycle began in September.
Importantly, policy makers didn't indicate in their statement, as many on Wall Street had expected, plans to halt this current cycle of rate cuts. Only two policy makers dissented, calling for no change in interest rates.
Crude oil crept above $114 a barrel after the Fed rate decision, but remained down a dollar and change from the prior close. Earlier, the EIA reported a larger-than-expected build in crude inventories.
Airline stocks turned mixed after an earlier boost. Also in the sector, British Airways confirmed a rumor circulated in the market on Monday that it is exploring an alliance with airlines including AMR's American and Continental .
On the economic front, U.S. gross domestic product grew at a 0.6 percent annual pace, beating expectations, the Commerce Department reported in the first of three readings on first-quarter GDP. That was the same pace as in the fourth quarter of 2007.
A closely-watched inflation gauge in the GDP report, core prices excluding food and energy, rose at a 2.2 percent rate, down from a 2.5-percent pace in the fourth quarter but still above the Federal Reserve's comfort zone, which tops out at 2 percent.
Offering insight into the employment situation ahead of Friday's jobs report, ADP said private-sector employers added 10,000 jobs to payrollsin April. Economists polled by Reuters had expected payrolls to shrink by 60,000 jobs.
Blue chips General Motors and Procter & Gamble kept the Dow in triple-digit territory after both firms surpassed expectations and P&G raised its outlook.
"I’m starting to get a little more bullish on the market as earnings are unfolding," Steve Massocca, co-CEO of Pacific Growth Equities, told CNBC. "One of the reasons for my caution was that earnings season wasn't going to go well, the economy was going to slow and companies were going to have a difficult time finding profitability -- that's just not happening," Massocca said.
General Motors , the top gainer on the Dow, posted a smaller-than-expected loss for the first quarter. Still, the auto maker posted a hefty net loss of $3.3 billion due to a costly supplier strike and waning demand for some of its most profitable vehicles.GM also took a $1.45-billion charge for its remaining investment in finance company GMAC and a $731-million charge for its exposure to the bankruptcy of auto-parts supplier and former subsidiary Delphi.
Lots of snacks and other household items in the earnings hopper this morning.
Procter & Gamble , the No. 2 gainer on the Dow,reported itsnet income rose 8 percent, as cost-cutting measures helped offset high oil and commodity prices. The company, whose products include Pringles, Pampers and Iams pet food, posted higher quarterly profit as cost controls helped offset soaring prices for oil and other commodities, and raised its forecast for its fiscal year.
Colgate-Palmolive surpassed expectations, helped by strong overseas sales, but the company, whose products include Irish Spring and Softsoap, projected flat to slightly higher margins going forward, which dented the stock.
Both P&G and Colgate "are pushing very aggressively in China," JPMorgan's John Faucher told CNBC Wednesday. "We're seeing much more market share going to the multinationals, leaving local companies ... they're providing a much higher quality product at really a not much higher price point."
Kraft alsobeat profit forecasts, helped by price increases and new products. Excluding one-time items, earnings were flat. The largest North American food maker, whose brands include Oreo, Oscar Meyer, Triscuits and Tang, said sales rose 21 percent.
Citigroup was the biggest drag on the Dow after the bankearly Wednesdayboosted its stock offering to $4.5 billionfrom the $3 billion announced late Tuesday, citing increased demand.
Time Warner reported a first-quarter profit that fell shy of market expectations, but issued full year earnings guidance that was still in line with analysts' consensus estimates. The company also announced plans to spin off its cable services operations.
WEDNESDAY: Earnings after the bell from Prudential and Starbucks
THURSDAY: Monthly auto sales; jobless claims; personal income and spending; ISM manufacturing index; construction spending; earnings from Kodak, ExxonMobil
FRIDAY: April jobs report; factory orders; earnings from Chevron, Viacom
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