Stocks pared gains Tuesday after a slew of earnings reports that were largely positive a day after the markets took a thrashing following Standard & Poor's revision of its outlook for U.S. debt.
The Dow Jones Industrial Average slipped to a gain of about 10 points after rising more than 40 earlier, following a day when theblue-chip index sank 140 points.
Among Dow components Johnson & Johnson, Chevron and Caterpillar rose, while Bank of America and Travelers fell.
The S&P 500 traded flat, while the Nasdaq slipped. The CBOE Volatility Index, widely considered the best gauge of fear in the market, fell below 17.
Among key S&P 500 sectors, materials and energy rose, while consumerdiscretionary and financials fell.
While earnings season is still young, companies have been beating expectations about 75 percent of the time, which has been the case for the last several quarters.
What's different this time is there are fewer real surprises, and that's leading to a lackluster market, says Burt White, chief investment officer at LPL Financial.
"Companies are clearing the hurdle, but they are just clearing the hurdle, while others are clipping the jump," White said. But what people are looking for is "not mildly beating, but soundly beating."
Another trend is "consistent growers" in the consumer staples, health care, utilities, and telecom sectors are leading the market instead of the cyclicals, like materials and industrials, White said. That's because investors are concerned about austerity efforts in the U.S. and Europe and efforts by emerging countries like China to put the brakes on growth to curb inflation.
"This market is really worried about impact of austerity in half of the world, and the battle in the other half to slow inflation, " White said. "Both will be foots on the brake."
Johnson & Johnson, which is up nearly 3 percent Tuesday following a strong earnings report, is the kind of stable grower investors prefer in this kind of environment, he said.,
"I think we’re at very early stages of rotation in this market," White said. Investors are "looking for those companies that can be in charge of their own destiny."
In earnings, Goldman Sachssoundly beat expectations, with both sales and earnings in the first quarter coming in strong, but the bank's shares traded flat after the results received got a mixed review on Wall Street. Rochdale downgraded Goldman to "neutral" from "buy."
Several regional banks also released earnings Tuesday. Shares of US Bancorp and State Street both gained after beating estimates in the first quarter, but Bank of New York Mellon slumped despite reporting a 4 percent rise in first quarter profit as assets under custody and fee revenue increased.
Zions Bancorp , meanwhile, soared to the top of the S&P 500 after delivering surprisingly strong results, and receiving boosts in its rating and price target from several brokerages.
Texas Instruments fell Tuesdasy after reportings earnings which came in below analysts’ expectationsafter the bell on Monday. About $30 million in costs related to the earthquake in Japan last month took 2 cents out of the company's earnings.
"Japan has a very important role to play in the technology sector," White of LPL Financial said. The fact Japan is not recovery as quickly from the multiple disasters that occured last month is putting a crimp in those stocks.
Most semiconductor stocks slumped following Texas Instrument's results, including Nvidia , Marvell and Cree .
IBM and Intel were mixed ahead of reporting earnings after the market closes today.
Meanwhile, Research in Motion's Playbook, the Blackberry maker's response to Apple’s iPad, went on sale Tuesday.
Apple is in the spotlight in a separate development as well after Reuters reported the group sued rivalSamsung Electronics, claiming that Samsung's Galaxy line of mobile phones and tablet "slavishly" copies the iPhone and iPad.
Nasdaq OMX Group and Intercontinental Exchange are pursuing their proposed takeoverof NYSE Euronext by lining up commitments to fund the takeover, and offering to pay a reverse breakup fee. The NYSE board has rejected the Nasdaq/ICE's $11.3 billion bid in favor of a bid by Deutsche Boerse of Germany for $10.2 billion.
Meanwhile, oil prices fell slightly. London Brent crude fell below $121 a barrel, while U.S. light crude fell below $107.
Gold prices traded flat but at lofty levels above $1,490 an ounce, while the dollar fell slightly against a basket of currencies as the euro got a boost from economic news.
In economic news, housing starts in March rose 7.2 percent to a seasonally adjusted annual rate of 549,000 units, while building permits for the month rose 11.2 percent, the Commerce Department said Tuesday.
In Europe, Swiss drugmaker Novartis reported first-quarter earnings above analyst forecasts. The stock was 3.3 percent higher in mid-morning trading. European shares closedhigher, helped by positive earnings.
On Tap Next Week:
TUESDAY: Fifth Third shareholders meeting, Moody's shareholders meeting, BlackBerry Tablet launches; earnings from IBM, Intel, Yahoo after-the-bell.
WEDNESDAY: Weekly mortgage applications, existing home sales, oil inventories; earnings from Abbott Labs, AT&T, United Tech and Wells Fargo before-the-bell and AmEx, Amgen, Apple, Qualcomm, Yum Brands after-the-bell.
THURSDAY: Weekly jobless claims, Philadelphia Fed survey, leading indicators, money supply, Citigroup shareholders meeting; earnings from DuPont, GE, McDonald's, Morgan Stanley, Travelers and Verizon before-the-bell and Advanced Micro and Capital One after-the-bell.
FRIDAY: Good Friday—All markets closed, banks open.
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