Stocks gave up early gains Tuesday as investors weighed better-than-expected earnings from Goldman Sachs and a sharp jump in wholesale inflation.
Goldman reported its profit slipped 11 percent to $2.09 billion, or $4.58 a share, due to turmoil in financial markets but the results blew past expectations. Revenue fell 7 percent to $9.42 billion but also beat expectations.
"Goldman has always been one that hasn't been as close to the [subprime-mortgage] trouble as some of the others. But the story is good and it adds fuel to the argument that the financial arena is getting back to the business of making money," Jim Paulsen, chief investment officer at Wells Capital Management, told Reuters.
Goldman shares ticked higher but overall, the financial sector pulled back after leading the prior session's rally.
Technology stocks also retreated after a strong showing on Monday.
Producer prices rose 1.4 percent last month, higher than the 1 percent economists had expected. But the core producer-price index, which excludes volatile food and energy prices, rose 0.2 percent, in line with expectations. Compared with May 2007, the PPI is up 7.2 percent.
"I think it's amazing that traders are ignoring [the year-on-year] number, but the S&P is hanging in there pretty well," Scott Nations of Fortress Trading told CNBC.
Also giving a boost to the market were articles in both the Wall Street Journal and Financial Times that market chatter about the Fed raising rates has been overblown. That follows a similar article in the Washington Post on Monday, citing a source close to Bernanke.
Oil was down more than $1 a barrel, trading between $133 and $134 a barrel, even though the dollar fell against the euro.
On the home front, housing starts dropped 3.3 percentand applications for building permits fell 1.3 percent in May, the National Association of Home Builders reported. Both gauges came in as expected.
Still, housing stocks tumbled, with Centex , DH Horton and KB Home all off more than 2 percent.
In other economic news, the U.S. current account deficit widened by a larger-than-expected margin in the first quarter to $176.4 billion from a downwardly revised $167.2 billion in the fourth quarter, the Commerce Department reported. U.S. industrial production fell unexpectedly by 0.2 percent in May, according to the Federal Reserve.
(Can the dollar handle a Fed on hold? Click on the video at left.)
Consumer-electronics retailer Best Buy posted a lower but better-than-expected quarterly profitTuesday, citing market-share gains in televisions, computers and video gaming, and backed its full-year outlook. Still, there's a lot of cynicism that pinched consumers won't be spending much on electronics and the stock tumbled more than 3 percent.
Adobe Systems surprised markets with better-than-expected results. After the closing bell Monday, Adobe reported a second-quarter profit of 50 cents a share on sales of $886.9 million for its second quarter, compared with 37 cents a share on sales of $746 million, a year earlier. Still, the stock fell more than 1 percent.
Still to Come:
WEDNESDAY: MBA mortgage applications survey; oil inventories; Fed's Yellen speaks; Morgan Stanley, FedEx earnings
THURSDAY: Jobless claims; Philly Fed survey; leading indicators; natural gas inventories; Fed advisory panel meets to discuss credit-card regulation
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