Stocks Turn Mixed; Energy, Tech Gain
Special to CNBC.com
Stocks were mixed Wednesday in the absence of major economic or earnings news, as investors continued to weigh the Federal Reserve's next moves.
The Dow Jones Industrial Average was down slightly, after declining more than 55 earlier. Dupont , Travelers and Disney led the laggards, while Hewlett-Packard and Boeing rose.
The S&P 500 and the Nasdaq were also lower. The CBOE Volatility Index, widely considered the best gauge of fear in the market, rose above 23.
All key S&P 500 sectors were lower, led by financials, consumer discretionary stocks and health care. The energy sector rose.
Stocks finished near session highs after a volatile session Tuesday, despite some disappointing economic data.
Increasing speculation that the Fed will begin quantitiatve easing was pressuring banks, which were among the weakest performing sectors Wednesday.
That's because Fed purchases of intermediate-term Treasury securities will flatten the yield curve between two-year-notes and 30-year bonds, making it more difficult for commercial banks to make a profit, said Jeffrey Kleintop, chief market strategist at LPL Financial.
Banks tend to buy short-term debt and lend long-term, so as the margin between short and long-term yields flattens, "their profit margin narrows," Kleintop said.
Most of the big banks were lower, including JPMorgan , Bank of America and Wells Fargo .
The Treasury Department said it plans to sell some of the $2.2 billion in trust preferred securities it received from Citigroup in January 2009.
On the earnings front, shares of Family Dollar rose after the discount retailer reported a 23 percent rise in fourth-quarter profit, beating Wall Street estimates. The company also said it could beat analyst estimates for the fiscal year.
FedEx shares were slightly lower after the company said its Express business was on track to produce double-digit margins.
Hewlett-Packard rose after it forecast better-than-expected fiscal 2011 revenue and earningsat its annual analysts conference on Tuesday. The tech giant did not, however, name a chief executive to succeed Mark Hurd.
Also in technology news, shares of Jabil Circuitrose after Needham Research raised the electronics-component maker to a "strong buy" from "buy." Jabil had slumped Tuesday after forecasting a lower-than-expected revenue target for the first quarter.
Amazon.com fell despite a ratings upgrade from Barclays to "overweight," saying the Internet retailer will sell more than 5 million Kindles this year. Barclays also raised the Internet retailer's price target to $180 from $132.
Green Mountain Coffee plunged after the company said the U.S. Securities and Exchange Commission are looking into the company's revenue recognition practices and its relationshiop with a 'fulfillment' vendor.
Carnival rose slightly after Goldman Sachs raised the cruise line's rating to "buy" from "neutral," and boosted its price target to $44 from $36, saying the company's margins will improve from cost cuts and low supply growth.
Live Nation Entertainment rose slightly after news that media mogul Barry Diller said he would resign as chairman, according to reports.
A day after its shares tumbled, Monsanto rose after Deutche Bank issued a "buy" rating for the stock, although it cut the seed-maker's price target to $65 from $70.
Commodity stocks, including cotton, copper and corn, as well as gold, meanwhile, should do better, as should energy, materials, and industrials, on the theory the Fed is looking for inflation to rise, Kleintop said.
The Fed's anticipated moves led to a weaker dollar Wednesday, which had helped the price of gold to hit fresh highs, although the price was basically flat Wednesday morning.
The U.S. Energy Information Administration reported crude inventories fell by 475,000 barrels last week, more than expected. Oil prices rose after the news to trade above $76 a barrel.
European shares were lower as the Irish Parliament gathered amid rising bond yields and ahead of another round of recapitalization for the nationalized lenderAnglo Irish Bank.
Europe also braced for protestsacross the continent against austerity measures, including pay freezes and higher taxes. While the news may be playing a role in investor concerns about global growth, the euro continued to trade at stronger levels against the dollar, Kleintop at LPL Financial said.
- Slideshow: Europe Protests—In Pictures
The U.S. recovery is slower than expected, but any move by the Federal Reserve to try to speed it along by buying more Treasurys would have a more "muted" effect than earlier efforts, a top Fed official said on Wednesday.
Minneapolis Fed President Narayana Kocherlakota said that any move by the Fed to boost the economy through Treasury purchases would have a more "muted" effect than earlier efforts.Kocherlakota was speaking at the European Economics and Financial Centre in London.
More Fed speeches are scheduled this afternoon: Philadelphia Fed President Charles Plosser will appear at 12:30 p.m. in Vineland, New Jersey; and Boston Fed President Eric Rosengren speaks in New York at 1:15 p.m ET.
Also at 1 p.m. ET the results of Treasury's auction of 7-year notes will be released.
On the economic front, mortgage applications for both purchases and refinancings fell for a fourth straight week despite low interest rates, although the Mortgage Bankers' Association reported a boost in home loans for the week ended Sept. 24. The MBA's seasonally adjusted purchase index, a tentative early indicator of home sales, increased 2.4 percent, while the index for both loans and refinancings slipped 0.8 percent.
On Tap For This Week:
WEDNESDAY: Fed Pres Plosser speaks; Boston Fed Pres Rosengren speaks; 7-year note auction
THURSDAY: Reading on GDP; Weekly jobless claims; Corporate profits; Chicago PMI; Hearing on J&J recalls
FRIDAY: Personal spending; NY Fed Pres Dudley speaks; Consumer sentiment; ISM manufacturing index; Construction spending; Monthly auto sales; BP's Hayward steps down
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