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Stocks Gain Modestly; Chevron Falls

Wednesday, 15 Sep 2010 | 12:24 PM ET

Stocks were modestly higher Wednesday amid light volume and after a cluster of economic data gave a mixed view of the economy's future.

The Dow Jones Industrial Average rose more than 30 points, led by Travelers, Cisco and Kraft . Chevron and Alcoa fell.

The S&P 500 and the Nasdaq advanced slightly. The CBOE Volatility Index, widely considered the best gauge of in the market, rose above 22.

Among key S&P 500 sectors, energy, materials and utilities declined, while health care and consumer staples rose.

The Dow and S&P 500 snapped a four-day winning streak Tuesday with financial and industrial stocks leading the declines. The indexes had been up for eight out of the last nine sessions.

"Every day that we go by without a disaster coming out of Europe and the financial services industry is a good day," said Paul Larson, equities strategist at Morningstar. "A lot of the breathless predictions of doom and gloom, are frankly not just coming to fruition and that’s a good thing."

Energy stocks were weak despite a fall in crude oil inventories, more than expected, as traders focused on Enbridge's announcement that it had fixed a leaking pipeline. Oil fellto about $75.50 a barrel.

Energy giants Chevron and Exxon slumped, as did drillers, including Diamond Offshore Drillingand Schlumberger .

The technology sector rose, but chip stocks slumped after Goldman Sachs downgraded Micron Technology to "neutral," from "buy," citing weakness in the PC market due to a surge in tablet sales. The bank also downgraded chipmaker Maxim Integrated Products to "sell," also citing the weaker PC market.

Homebuilders, including Beazer Homes USA , Hovnanian Enterprises and Pulte Group, were lower after data Wednesday showed continued weakness in the housing sector. U.S. mortgage applications for both home purchases and refinancing fell 8.9 percent in September, as refinancing slowed for a second week, and a survey from real estate website Trulia.com showed more sellers are slashing asking prices for a third month.

Also Beazer said orders for new homes could be as low at 700,000 vs. 767,000 previously supported.

Steel stocks remained weak Wednesday after several reported poor third quarter outlooks. AK Steel slumped after saying higher raw material and operating costs will hurt third quarter earnings, while Steel Dynamics cited lower prices and lower volumes from recycling operations. Nucor had revised its third quarter earnings lower on Tuesdsay, citing slowing demand.

Also in corporate news, Kraft said its purchase of Cadbury will add $1 billion in revenue lead to $750 million in cost savings by 2013. Along with productivity gains, flat overhead growth and pricing to offset input costs, Kraft said it would have higher gross profit margins.

Pall surged at the open to lead the S&P 500 after reporting a plunge in fourth quarter profits but stronger revenues and gross margins. The maker of filtration and water-purification products for industry and life sciences pointed to strong sales for most of its businesses.

On the economic front, U.S. industrial production rose 0.2 percent in August from a 0.6 percent gain in July, in line with expectations, according to Federal Reserve data. July's figures were unusually strong because of a boost in auto manufacturing. Excluding motor vehicles and parts, total industry output increased 0.4 percent in August, up from 0.3 percent in July.

Also, capacity utilization, a measure of slack in the economy, rose modestly to 74.7 percent.

Meanwhile, import prices rose 0.6 percent after rising by a revised 0.1 percent in July, according to the Labor Department. Analysts polled by Reuters had forecast import prices rising 0.3 percent. In the 12 months to August, import prices rose 4.1 percent, the smallest advance since November.

And the September Empire State Manufacturing Survey had an unexpected drop to 4.14 in September from 7.10 in August. The consensus forecast was for an index reading of 6.4.

The market had been struggling to find direction earlier after enthusiasm in Japan for government intervention to weaken the yen failed to buoy other Asian markets and European indexes found little momentum either way.

On the Calendar:

THURSDAY: PPI, current account, jobless claims, Philly Fed survey; before-the-bell earnings from FedEx, after-the-bell earnings from Oracle and Research In Motion
FRIDAY: CPI, consumer sentiment

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