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Stocks Lose Steam but End Up; Energy Slips

Wednesday, 18 Aug 2010 | 4:46 PM ET

Stocks ended higher after giving up more than 30 points of gains Wednesday as investors shrugged off tepid reports from retailers.

The Dow Jones Industrial Averageended up 9.7 points, or .09 percent to 10,415.54 amid thin volume, led by Home Depot, Cisco and Hewlett-Packard . The Dow is almost back to positive territory for the year, although it remains down 0.12 percent.

The S&P 500 ended 0.15 percent higher at 1,094.16 while the Nasdaq ended up 0.3 percent to 2,215.70. The CBOE Volatility Index, widely considered the best gauge of fear in the market, rose above 24.

Most of the S&P sectors were higher, led by consumer discretionary, telecom and technology while energy and utilities were lower.

“We’re coming off of an oversold condition that we had last week,” said Marc Pado, U.S. market strategist at Cantor Fitzgerald. “Last week, the biggest negative was deflationary fears, so right now, we’re unwinding from some of that negative sentiment.”

Just before the close General Motorsfiled to sell shares to the publicin an offering that will allow the automaker to pay back some of its controversial government bailout. The offering is expected sometime in November, and will consist of both common and preferred shares.

Earnings were mixed: Deere reported better-than-expected results, thanks to strong sales for tractors and harvesters in the US. However, shares fell after the agricultural equipment maker warned that while sales in US and Canada should rise 5 to 10 percent this year, business in Europe will continue to be weak.

Target shares reversed an early loss after the retailer posted strong quarterly earnings. The figures were in line with expectations, and reflected a boost in sales of profitable items like clothing, and improvement in its credit card business.

BJ's Wholesale Club slippedafter the big-box retailer said full-year earnings would fall below analysts' estimatesas it expects merchandise sales to be less than its previous forecast.

Meanwhile, Chico's jumped more than 7 percent after the women's apparel retailer reported higher-than-expected profit as trendier fashion attracted shoppers and margins were boosted by exclusives at its outlet stores.

Shares of American Apparel continued to plunge following news that the retailer raised doubts about its ability to survive. The company also said that it received a subpoena from the US Attorney's Office in July, as well as inquiries from the U.S. Securities and Exchange Commission regarding the resignation of its former auditors.

Home Depot shares rose after Citigroup raised its price target for the home improvement retailer to $38 from $34. RBC, however, cut the retailer's price target to $31 from $33.

Investing in Big Box Retailers
Debating whether investors should buy, sell or hold big box retailers, with Jan Kniffen, J Rogers Kniffen, and David Strasser, Janney Montgomery Scott.

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Among technology stocks, Dell was higher after shareholders gave CEO and chairman Michael Dell the fewest number of votes while electing him to the board of the computer maker he founded. In addition, brokerage Bernstein cut its price targets on the tech giant to $18 from $20.

Verizon shares fell after the telecommunications firm said it expects to launch a software application that will allow FiOS TV customers to watch live television on tablet computers such as Apple's iPads next year.

Analog Devices continued to lead the tech sector after the microchip maker posted a better-than-expected profitfor the quarter on Tuesday and issued a positive outlook.

Semiconductor-equipment maker Applied Materials and retailer Limited Brands are expected to report earnings after the bell.

On the economic front, U.S. mortgage applications soared last week on the strongest demand for home refinancing loansin 15 months, according to the Mortgage Bankers Association.

Investors are awaiting more news on the employment front from the release of jobless claims on Thursday.

Oil fell to $75.42 after U.S. government data showed crude inventories and oil products rose to a record high. The data follows Tuesday's report from the American Petroleum Institute, which showed a surprisingly large build in supplies. Crude prices have fallen in six of the last seven sessions.

ExxonMobil and Chevron fell, leading the Dow lower most of the day.

Johnson & Johnson was up slightly after Chief Executive William Weldon told The Wall Street Journal it was restructuring its manufacturing operations. The company is also creating a quality control position, reporting directly to the chief executive, in the wake of lapses at its in plants that sparked several recalls.

In merger and acquisition news, mining giant BHP Billiton's $38.6 billion bid for Potashturned hostile, following its board's election of BHP's initial offer as "grossly inadequate."

Shares of U.S. Steel jumped following rumors that Arcelor Mittal plans to acquire the steelmaker.

Less than 1 billion shares changed hands on the New York Stock Exchange Wednesday, with advancers leading decliners 3 to 2.

In other markets, the 10-year Treasury note remained unchanged to yield 2.64 percent. Comex gold for August delivery gained 0.25 percent to $1,229.70, rising for the sixth consecutive session.

On The Calendar:

THURSDAY: Jobless claims, leading indicators, Philadelphia Fed survey; earnings after the bell from HP, Dell, Gap and Intuit
FRIDAY: No major events scheduled

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