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Mood Swing Clips Stocks; Oil Falls

Published: Tuesday, 28 Jul 2009 | 1:19 PM ET

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By: Cindy Perman and JeeYeon Park
CNBC.com

Stocks skidded Tuesday after a report showed consumer confidence is waning amid worries about the job market.

It was a struggle all morning as investors juggled another batch of disappointing earnings results against an encouraging report on the housing market.

Major U.S. Indexes

.DJIA

.NCOMP

.SPX

Stocks had also struggled on Monday but managed to squeeze out a gain as banks got a boost from a rise in new-home sales.

The Conference Board reported its gauge of consumer confidence fell to 46.6 in July from 49.3 in June. It was the second straight drop and came as a disappointment as economists had expected the gauge to hold steady around 49, according to a Reuters survey.

Investors shrugged off today's encouraging reading on the housing sector: The S&P/Case-Shiller Home Price index posted its first month-over-month increase in nearly three years in May, though prices were still down sharply from a year earlier.

FOR INVESTORS

San Francisco Federal Reserve President Janet Yellen will have a speech on the U.S. economic outlook in Idaho at 12:35 pm, and the Treasury will auction 2-year notes today with results expected shortly after 1 pm.

The trading floor was buzzing about a report from the front-page of today's Wall Street Journal that said regulators plan to issue a report next month that trader speculation was to blame for last year's spike in oil prices.

Bank of America [BAC Loading... () ] denied another report in the Wall Street Journal that suggested it plans to reduce its 6,100-branch network by about 10 percent, after two decades of expansion. A company spokesman said the company did plan to pare its network but not by that much.

General Electric [GE Loading... () ] was among the biggest gainers on the Dow after the company announced it won't need to raise capital for its troubled GE Capital financing arm. The parent of CNBC.com said that even in "adverse scenarios" there would be no need for outside funds.

On the earnings front, Viacom [VIA Loading... () ] reported a sharp drop in earnings, as the owner of MTV Networks and Paramount film studios said they were hit by poor advertising revenue and a dropoff in its videogame and DVD sales.

Office Depot [ODP Loading... () ] delivered results that fell short of analysts' expectations. Leather-handbag maker Coach [COH Loading... () ] hit its target but sales and margins declined.

Shares of Amgen [AMGN Loading... () ] rose after the company late Monday beat earnings expectations, helped by an arthritis drug and a tax benefit. The biotech giant also raised its full-year outlook.

Shares of Mylan [MYL Loading... () ] rebounded after the generic drug maker said the FDA had found only a minor deviation from standard procedures at its main plant in West Virginia. The stock had dropped 13 percent on Monday following news of a quality-control issue at the plant, the latest in a string of deficiences found at generic drug makers.

And there was more merger news from the tech sector: IBM [IBM Loading... () ] has agreed to buy SPSS [SPSS Loading... () ], which makes analytics software, for $1.2 billion, or $50 a share. SPSS shares soared. IBM slipped.

This came a day after news that Agilent Technologies [A Loading... () ] plans to buy scientific-instrument maker Varian [VARI Loading... () ] for $1.5 billion, or $52 a share in cash. And Swedish telecom Ericsson [ERIC Loading... () ] recently agreed to buy Nortel's wireless unit for $1.13 billion.

The big earnings reports to watch this week will be from major energy companies.

BP [BP Loading... () ] started the chain, as Europe’s second largest oil company reported its profit was cut in half by lower oil prices and weaker refining margins. The company also increased its cost-cutting target for 2009 by 50 percent.

Later in the week, we'll get reports from Chevron [CVX Loading... () ], ExxonMobil [XOM Loading... () ], ConocoPhillips and Royal Dutch Shell.

So far this earnings season, companies beating expectations have outnumbered the misses by a ratio of 5 to 1, the highest since 2004, according to analysts at Birinyi Associates.

Among the biggest beats so far were Goldman Sachs, miner Freeport-McMoRan Copper & Gold and flash-memory maker SanDisk.