Stocks Pare Gains Ahead of Close, Led by Banks
Special to CNBC.com
Stocks trimmed gains but remained higher heading into the close Wednesday after the government released data on consumer credit and investors learned the economy is growing but at a slower rate nationwide.
The Dow Jones Industrial Averagewas up more than 40 points, led by AIG, JP Morgan , and General Electric. Hewlett-Packard and Intel fell.
The S&P 500and Nasdaq were also higher. TheCBOE Volatility Index, widely considered the best gauge of fear in the market, fell below 24.
Most key S&P sectors were higher, led by financials, industrials and energy. Utilities stocks slipped.
Stocks slipped after the text of President Obama's speech Wednesday on business tax breaks was made available and before the Federal Reserve's "beige book" survey of 12 regional banks showed a "deceleration" in economic growth across the country.
While higher, stocks remain within a trading range that reflects the fact the Fed's report didn't offer a definitive difference in the economic outlook, said Doug Roberts, chief investment strategist at ChannelCapitalResearch.com.
"You don’t have a catalyst to the upside, and you don’t have a catalyst to the downside," Roberts said.
The S&P 500, for instance, is trading about in the middle of a 12 percent range that has existed for the past four months, driven mainly by program trading and short-term traders reacting to news events, Roberts said.
"We’re locked in this trading range," he said. "You’re bouncing off the walls on each end. Sometimes you bounce off a piece of furniture, but you make no progress getting out of the room."
Financials recovered from Tuesday's losses following a bounce in European bank shares. Bank ofAmerica and Goldman Sachs rose.
Meanwhile, Goldman is reportedly facing a big fine by from the U.K.'s Financial Services Authority, according to the Financial Times.
Also, the firm is in talks with at least five potential hirersfor traders at its U.S. proprietary trading group, according to sources.
Tech stocks were mostly higher across the board, but PC and semiconductor stocks remained under pressure following several downgrades.
Among the downgrades, UBS cut Intel to "neutral" from "buy," citing weak demand for PCs and expected price cuts in the fourth quarter. The brokerage also lowered its price target for Intel to $19.50 per share from $28.
UBS also reportedly cut HP to "neutral" from "buy."
On Tuesday, HP sued former CEO Mark Hurdand asked a court to block him from joining rival Oracle , saying his hiring by the tech firm puts HP's trade secrets "in peril."
Oracle said it plans to pay Hurd a base salary of $950,000 a yearin addition to a $10 million fiscal 2011 bonus.
Meanwhile, UBS reiterated its buy rating for Apple , and raised its price target for the tech giant's stock to $350 per share from $340, citing strong demand for the firm's iPad and iPhone4.
Google shares rose after the search-engine giant announced a new search feature called "Google Instant,"which places a premium on getting results to users at a quicker rate.
And Altera increased its guidance for third-quarter revenue growth. Jefferies cut its price target on the chipmaker to $26 from $32.
In the energy sector, BP rose after Fitch raised its ratings on the oil company. In addition, BP released an internal reporton the Deepwater Horizon blast in April that blamed Transocean for missing danger signs and Halliburton for cementing the well improperly.
Oil rose above $74 a barrelamida weaker dollarand a raised forecast for global oil demand growth from the government helped lift crude futures.
Oil giants Chevron , ConocoPhilips and ExxonMobil were trading higher. Meanwhile, brokerage Benchmark cut its price target on Chevron to $94 from $98, raised its price target on ConocoPhillips to $48 from $43, and increased ExxonMobil to $52 from $48.
In the day's earnings news, Talbots fell after the women's clothing retailer posted lower-than-expected sales for the quarter, although the company beat earnings expectations.
Navistar shares also tumbled after the truck maker reported sales that were less-than-expected. The company also cut its sales forecast for the year.
And on the M&A front, Airgasrejected the latest offerfrom Air Products and Chemicals , saying the offered price of $65.50 was too low. Glass Lewis, a proxy firm, advised Airgas shareholders on Tuesday to vote against the offer and support incumbent directors up for election to the board next week.
And shares of ZymoGenetics skyrocketed more than 80 percent after Bristol-Myers Squibb agreed to buy the biotech firm for $9.75 per share, 84 percent above the company's closing price on Tuesday.
Tyco shares rose after the board of the diversified industrial company authorized a $1 billion stock buyback.
The New York Times led the S&P 500 with an 8 percent jump on a rumor Carlos Slim, the Mexican billionaire who already owns 14 percent of the newspaper's stock, was planning to buy more. Similar speculation has surfaced before. A spokesman for Slim denied the rumor to Bloomberg News.
The government auctioned $21 billion of 10-year notes, which had a high yield of 2.670 percent and a bid-to-cover of 3.21. Reception to the auction was strong, according to Morgan Stanley.
The Treasury will sell $13 billion in 30-year bonds Thursday.
In economic news, Obama was in Cleveland providing details on billions of dollars in new business tax incentives and infrastructure spending. The speech criticized Republicans for blocking proposals that could help the economy. The President called on Congress to continue middle-class tax cuts and to end tax cuts for the wealthiest Americans.
The government reported consumer credit fell by $3.63 billion in July, the sixth straight monthly drop.
Earlier Wednesday, an industry group reported applications for home loans fell last week as refinancing slowed.
On Tap This Week:
THURSDAY: New York Fashion Week begins, McDonald's August sales, weekly jobless claims, oil inventories, 30-year Treasury bond auction; after-the-bell earnings from National Semi
FRIDAY: Wholesale trade
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