News Article
BusinessWeek.com
October 24, 2006
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Stocks End Mixed as Dow Hits Another High

Investors digested a raft of earnings reports -- and marked time ahead of Wednesday's Fed announcement

Stocks finished mixed Tuesday, paring early gains as the Dow set new all-time closing and intraday highs for the second consecutive day. Earnings reports were in focus amid a quiet economic docket, while investors awaited Wednesday's Federal Reserve policy statement and Friday's report on third-quarter economic growth.

The Dow Jones industrial average rose 10.97 points, or 0.09%, to 12,127.88, its best-ever close, after briefly touching a new intraday record of 12,133.8. The broader Standard & Poor's 500 index nudged higher 0.35 points, or 0.03%, to 1,377.37. The tech-heavy Nasdaq composite fell 10.69 points, or 0.45%, to 2,344.87.

NYSE breadth was positive, with 18 issues advancing for every 15 declining. Nasdaq breadth was 18-13 negative.

The Fed's committee on monetary policy kicked off a two-day meeting Tuesday. Central bankers are widely expected to keep interest rates unchanged, but investors will be watching for any new comments on inflation or the economy in Wednesday's policy statement. Some are wary of a potentially hawkish tone from the Fed on inflation risks, says Standard & Poor's Equity Research.

Policymakers aren't likely to lower rates anytime soon, some analysts say. "Considering that we have the Dow breaking new highs every day and yesterday we just saw the JOC metals break out to a record high, it stands to reason that even the policy doves are not going to be doing anything but sit on their hands near-term," says David Rosenberg, North American analyst at Merrill Lynch, in a research report. "There are just too many crosscurrents."

Along with the Fed statement, Wednesday's calendar holds a fresh set of housing data. Existing home sales are expected to slow 1.6% to a pace of 6.2 million units, says Action Economics.

On the company side Tuesday, investors were sifting through another batch of earnings. Dow component DuPont (DD) was higher after the company swung to a $485 million third-quarter profit, beating analyst estimates.

Meanwhile, Amgen (AMGN) was higher after the biotech company reported a 14% jump in third-quarter profit and boosted its 2006 forecast for the second time this year.

Shares of Lockheed Martin (LMT) gained after the defense contractor posted a 47% jump in third-quarter profit, exceeding Wall Street forecasts.

Oil gaint BP (BP) was up following a 3.6% drop in third-quarter earnings attributed to the company's production difficulties in Alaska.

Telecom equipment maker Lucent Technologies (LU) was higher after the company, set to be acquired by France's Alcatel, reported flat third-quarter earnings.

On the downside, Texas Instruments (TXN) was lower after the chipmaker said third-quarter sales rose 13% to $3.76 billion, less than analysts expected.

Food maker Kraft (KFT) was also lower as third-quarter sales missed Street projections despite an 11% gain in earnings.

Quarterly results were also on tap from Internet retailer Amazon (AMZN). Companies set to report earnings Wednesday include General Motors (GM) and ConocoPhillips (COP).

Elsewhere, coffee retailer Starbucks (SBUX) bought the operator of more than 60 of its Chinese outlets.

Internet search giant Google (GOOG) introduced a customized version of its search engine that is similar to an existing offering from rival Yahoo! (YHOO).

On the analyst front, Ford (F) was higher after Goldman Sachs raised its recommendation on the automaker from sell to neutral.

Shares of Pfizer (PFE) dipped after UBS downgraded the drugmaker from buy to neutral.

In the energy markets, December West Texas Intermediate crude futures rose 54 cents to $59.35 a barrel ahead of Wednesday's inventory report.

European markets finished mixed. In London, the FTSE-100 index rose 16.4 points, or 0.27%, to 6,182.5. Germany's DAX index added 4.61 points, or 0.07%, to 6,247.52. In Paris, the CAC 40 index fell 7.27 points, or 0.13%, to 5,404.54.

Asian markets ended mixed. In Japan, the Nikkei 225 index slipped 8.35 points, or 0.05%, to 16,780.47. In Hong Kong, the Hang Seng index gained 63.56 points, or 0.35%, to 18,153.41. Korea's Kospi index advanced 1.55 points, or 0.11%, to 1,366.5.

Treasury Market

Treasury yields drifted lower as the Fed kicked off its meeting. The 10-year note edged up in price to 100-13/32 for a yield of 4.82%, while the 30-year bond rose modestly to 93-04/32 for a yield of 4.94%.