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Stocks ended slightly lower Tuesday, though the Nasdaq eked out a gain. And Citigroup shares soared.
The Dow Jones Industrial Average shed more than 11 points, or 0.1 percent, snapping a three-session winning streak. The S&P 500 fell 0.3 percent, while the Nasdaq gained 0.4 percent.
Stocks had struggled for much of the day as a drop in consumer confidence and a fresh batch of disappointing earnings put a damper on recovery hopes.
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.
The report came as a disappointment as economists had expected the gauge to hold steady around 49, according to a Reuters survey. But Joshua Shapiro, chief U.S. economist at MFR Inc., said in a note to clients that it's simply indicative of a "shift from 'end of the world' readings to those that more closely approximate stagnation."
"We do not think that conditions are going to progress in a straight line up from here, and our forecast remains that the road to recovery will be a longer and more difficult journey than most believe at the moment," Shapiro said.
San Francisco Fed president Janet Yellen said the early stages of recovery will be "painfully slow," helping to keep inflation low for now, and that a return to full employment could take several years.
"We glimpse the first solid signs ... that economic growth may be poised to resume. Indeed, I expect that to happen some time this year," Yellen said at a meeting of Oregon and Idaho bankers.
Today brought another 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.
U.S. Treasurys ended mixed after the Treasury announced the results of a $42 billion auction of two-year notes in a sale that drew dull demand by some measures and might not bode well for other bond auctions later this week.
This comes after yesterday's $32 billion auction of three-month bills and $31 billion of six-month bills to decent demand as part of the Treasury's weekly routine.
Citigroup [C
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] shares soared 10 percent as the bank's conversion of preferred to common stock continued to create volatility. Citi said it will be delivering almost 6 billion of new stock on Thursday.
Shares of U.S. health insurers rose broadly led by Aetna [AET
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], Coventry [CVH
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], and Cigna [CI
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] after a bipartisan group of senators closed in on a compromise that omits key Democratic priorities but seeks to hold down costs, as lawmakers struggled to deliver a sweeping health legislation to President Barack Obama.
Shares of American International Group [AIG
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] jumped 2.7 percent after the troubled insurer divested another asset for nearly $700 million. AIG said it has closed a deal to sell a majority of its life insurance premium-finance business. This comes after the company renamed its AIU property-casualty business Monday to distance the unit from the problems of its parent company.
Boeing [BA
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] was the biggest percentage gainer on the Dow, followed by Bank of America and General Electric.
Bank of America [BAC
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] shares rose 1.9 percent after the bank denied a 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
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] climbed 1.6 percent, 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.
The trading floor was buzzing today 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.
The head of the Commodity Futures Trading Commission said Tuesday that the group will consider "every option'' to clamp down on excessive speculation in energy markets.
Crude oil fell more than $1, settling at $67.23 a barrel. A recent Reuters poll of analysts forecast oil prices will average $73 a barrel next year, up from an average 2009 price prediction of $58.23 a barrel.
The CBOE Volatility index, widely considered the best gauge of fear in the market, ticked slightly higher, ending around 25, though well off its high near 80 in the fall.
On the earnings front, shares of Viacom [VIA
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] fell after the owner of MTV Networks and Paramount film studios reported a sharp drop in earnings on poor advertising revenue and a dropoff in its videogame and DVD sales.
US Steel [X
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] shares also slid after the steel giant reported its second straight drop in earnings.
Office Depot [ODP
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] shares tumbled 18 percent after the office-supply chain missed analysts' earnings expectations. Leather-handbag maker Coach [COH
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] hit its target but sales and margins declined. Its shares fell 1.3 percent.
Shares of Amgen [AMGN
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] rose 2.7 percent 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
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] rebounded 3.8 percent 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.
More merger news from the tech sector: IBM [IBM
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] has agreed to buy SPSS [SPSS
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], 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 plans to buy scientific-instrument maker Varian for $1.5 billion, or $52 a share in cash.
Another wirless deal: Sprint Nextel agreed to buy Virgin Mobil USA in a deal that values the prepaid-cellphone maker at $483 million. This followed news that Swedish telecom Ericsson 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
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] 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. Shares of Valero Energy [VLO
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] also dropped as the refining company reported a loss on hefty global fuel inventories and weak demand.
Later in the week, we'll get reports from Chevron [CVX
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], ExxonMobil [XOM
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], 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
Still to Come:
WEDNESDAY: Weekly mortgage applications; durable goods; weekly crude inventories; Fed's beige book; Earnings from ConocoPhillips, Sprint Nextel, Time Warner, WellPoint Health, Visa
THURSDAY: Weekly jobless claims; Earnings from AstraZeneca, ExxonMobil, Colgate-Palmolive, Eastman Kodak, Kellogg, MasterCard, Motorola, Disney, MetLife
FRIDAY: GDP; Chicago PMI; Earnings from Chevron
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