Early Pop Fizzles; HP Jumps 10%
An opening pop quickly fizzled Tuesday as the market's gloomy mood overshadowed an encouraging outlook from Hewlett-Packard.
General Motors was the biggest drag on the Dow after Treasury Secretary Henry Paulson said the government rescue fund should only be used for the financial system.
Shares of rival Ford wobbled.
Paulson is on Capitol Hill today, along with Federal Reserve Chairman Ben Bernanke, being grilled over why they did an about-face and decided to use TARP funds for recapitalizing financial institutions instead of buying bad or so-called toxic assets as was originally proposed.
Executives from the Big Three auto makers — GM, Ford and Chrysler —will please their case on the Hill later today.
If it's one thing the market hates, it's uncertainty, and the government is giving it to investors by the truckload.
The economic stimulus bill being backed by President-elect Barack Obama is unlikely to be approved by the Senate during its short legislative session this week, a top Senate aide said.
Still, Hewlett-Packard was the biggest gainer on the Dow after the hardware and software maker said said Tuesday it expects to top analysts' estimatesfor the fourth quarter and next year.
The news gave a boost to other big-name techs: Apple , Research In Motion , Dell and IBM were all higher.
"People began to realize that many of the techs are total discretionary and if people are hunkering down that was not good for the techs. They were badly beaten down," Art Cashin, director of floor operations for UBS, told CNBC. The HP news "is a sigh of relief" for the sector, Cashin said, but added, "I don’t know that it’s a turnaround."
The report helped lessen fears that the Dow industrials would retest the five-year closing low of 8175.77, hit on Oct. 27. In morning trading, the Dow was within 100 points of that.
"We will succeed this time and we're going to be seeing some positive divergence as we come back to where we were previously," Dodge Dorland, chief investment officer at Landor Capital Mgmt, told CNBC this morning.
But Cashin wasn't convinced.
"[I]t looks like we’re going to have to have another retest. If we break, we could get trap-door selling and just spiral down very quickly," Cashin said. "You can still feel that there’s a bottom nearby timewise I’m just hoping it’s also pricewise."
Roelof van den Akker, chartist from ING Wholesale Banking, went one further, saying the Dow could sink as low as 6,700, in another accelerated move similar to October's slump.
Elsewhere in tech land, Yahoo shares jumped 10 percent following news that CEO Jerry Yang will step down from his positionat the Internet portal as soon as the board finds a replacement.
In economic news,producer prices fell by a record 2.8 percent in October but core inflation, which strips out volatile food and energy prices, actually rose 0.4 percent in the month.
Still to come, the National Association of Home Builders' sentiment survey for November is out at 1 pm.
Home-improvement retailer Home Depotreported a 31 percent drop in quarterly profit Tuesday as consumers put off big-ticket projects amid a deepening economic crisis.But the profit of 45 cents a share beat analyst estimates and Home Depot shares rose.
Wal-Mart said customers are coming to its stores more frequently now that gasoline prices have fallen. Not one to look a gift horse in the mouth, the discount retailer said it's cutting prices on food items to win over shoppers ahead of the Thanksgiving holiday.
TUESDAY: Housing-market index
WEDNESDAY: Bank Reserve settlement; weekly mortgage applications; housing starts; CPI; oil inventories; Fed minutes; Fed's Kohn speaks; Earnings from BJ's Wholesale
THURSDAY: Weekly jobless claims; leading indicators; Philly Fed manufacturing survey; natural gas inventories; Fed's Bullard speaks; Earnings from Gamestop, Dell and Gap
FRIDAY: Fed's Plosser speaks; Earnings from Heinz
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