Stocks finished somewhat lower Tuesday in a volatile session. Investors pondered news that consumer confidence dipped more than expected in February, and the dismissal of the Russian government by President Vladimir Putin.
The Dow Jones industrial average shed 43.25 points, or 0.41%, to 10,566.37. The broader Standard & Poor's 500-stock index finished down 1.9 points, or 0.17%, to 1,139.09. The tech-heavy Nasdaq composite index ended down 2.08 points, or 0.1%, to 2,005.44. "The Nasdaq rallied a bit late in the day after bouncing off of chart support in the 1990 area," reports S&P's MarketScope. "The index has traced out a negative chart pattern of lower highs and lower lows."
The morning's less-than-stellar consumer confidence figures weighed on consumer staples and discretionary stocks. Gold prices and stocks were higher as the U.S. dollar weakened. Health care and materials stocks also rose.
"A series of down days on heavier flows is a clear warning sign that a deeper correction is unfolding," reports economic research firm Informa.
Larry Wachtel, market analyst at Wachovia Securities adds that "we're in month 12 of a bull market, and it's exhausted." Wachtel expects the market to correct a further three or four percentage points, adding to the current 7% dip in the Nasdaq, before it bottoms out.
In economic news Tuesday, closely watched consumer confidence figures dropped more than expected in February, to 87.3 down from a revised 96.4 reading in January. The presiding theme was the lack of job creation. The jobs-hard-to-get index is now at 32.1 vs. a prior 31.6 -- that's actually higher than its was a year ago, reports Informa -- while jobs plentiful fell to 11.8, vs. 12.3. The present situation index came in at 73.1, vs. a prior 79.4, while the expectations measure stood at 96.8, vs. a prior 107.8.
"This completes the round of major consumer sentiment surveys, with all showing a substantial deterioration in consumer moods and expectations," notes Informa.
World news played a role on Tuesday, starting with Russian President Vladimir Putin dismissal of Mikhail Kasyanov's government, pledging to appoint a team to overhaul policy ahead of next month's presidential election, according to wire-service reports. Also, the European Commission banned imports of U.S. poultry -- chicks and eggs -- for one month due to the outbreak of bird flu in Texas.
In corporate news, Fannie Mae (FNM) dipped 3.4%, and Freddie Mac (FRE) moved 2.8% lower after Federal Reserve chairman Alan Greenspan warned of potential financial system problems unless the company's debt growth is reined in, reports MarketScope. Greenspan's comments came as he addressed the Senate Banking Committee on reform of government-sponsored enterprises, or GSEs.
Home Depot (HD) posted fourth quarter earnings per share of 40 cents, vs. 30 cents one year earlier, on 7.6% higher same-store sales. The home improvement retailer has reiterated its fiscal 2005 sales growth guidance of 9% to 12%, and EPS growth of 10% to 14%, excluding an accounting charge. Home Depot shares ended higher.
dropped 13% after posting first quarter earnings per share of 33 cents, vs. 34 cents (pro forma), despite a 6% revenue rise. The semiconductor design software maker sees second quarter earnings as high as 35 cents, on revenue ranging from $285 million to $300 million. It also announced a deal to acquire Monolithic System Technology (MOSY
for $432 million. SG Cowen reportedly downgraded Synopsys, while S&P maintained its hold rating. Monolithic shares surged 85%, finishing at $12.97.
Circuit maker Zoran (ZRAN) added 13% despite posting a loss of 42 cents in its fourth quarter (GAAP), vs. a 1 cent EPS, as acquisition-related charges and other items offset a 66% revenue rise. Zoran sees its first quarter EPS as high as 5 cents (pro forma) on revenue as high as $78 million. CIBC World upgraded Zoran to sector outperform.
In media, radio-station operator Clear Channel (CCU) has posted ower-than-expected fourth quarter earnings of 30 cents, vs. the same amount last year, on a 4% sales rise. The company expects its operating income to increase in low double digits, and its EPS to increase in the mid-to-high teens for 2004. The stock finished 2.1% lower.
Lawn-equipment company Toro (TTC) posted first quarter earnings of 36 cents, vs. 27 cents on a 5.9% sales rise. Toro raised its fiscal 2004 EPS guidance to a range of 14% to 18% growth, and sees 7% to 9% revenue growth. Toro expects its second quarter earnings to be as high as $1.90. Janney Montgomery upgraded its rating of the stock to buy from hold. Toro shares added 5.1%.
This week's earnings calendar continues on Wednesday with high-end jewelry retailer Tiffany (TIF). Restaurant chain IHOP (IHP) is set to report on Thursday followed by Introgen Therapeutics (INGN) on Friday.
The rest of the week's economics news slate will be heavy. On Wednesday, a report on sales of existing homes in January is due. Sales are expected to slow to a 6.25 million annualized pace, down from 6.47 million in the previous month.
On Thursday, a report on new home sales in January is seen easing to a 1 million annualized pace from 1.06 million in December. Traders will also get a read of initial jobless claims. Friday delivers preliminary gross domestic product figures for the fourth quarter of 2003. Early GDP data are expected to show the economy grew 4.1% vs. 4.0% in previous estimates.
Treasuries closed higher in price Tuesday afternoon, after the consumer confidence figures arrived at levels below analysts' estimates and gave bonds a strong morning boost. While stocks see-sawed, they took "the front end off highs, but there was enough interest to keep the basic bid intact and the pop in stocks soon died," reports Informa. "There was selling in the afternoon at the lofty levels, but that did not really diminish the appetite for bonds, and prices moved back up into the close."
The U.S. dollar declined on the confidence news -- "even though the market was looking for a loss," says Informa -- the euro was trading higher at at $1.268, and the pound sterling was at $1.890. "The dollar was still a focus although not much talk was generated about it today," says Informa.
European stock markets finished lower on Tuesday. London's Financial Times-Stock Exchange 100 index dipped 27.5 points, or 0.61%, to 4,496.80, on profit taking amid some poor insurance industry results, reports S&P's MarketScope.
"Traders were not impressed with a report that business sentiment rose 1.3% in the fourth quarter," according to Marketscope.
Prudential (PUK), which cut its dividend payout for the second time, was lower as its full-year profits lagged analysts' forecasts.
In Paris, the CAC 40 edged 47.71 points lower, or 1.28%, to 3,683.44 on disappointing earnings forecasts. Television Francaise 1 was lower as its 2003 earnings arrived less than analysts' expectations. France Telecom was also lower.
Germany's DAX index slumped 1.9%, down 77.29 points, to 3,991.42, as Germany's IFO business climate index fell for the first time in 10 months to 96.4. The drop was led by wholesaling and manufacturing - two sectors highly sensitive to foreign exchange moves, says Informa. Munich Re was lower as Allianz said it would reduce its stake in the company. Carmaker Volkswagen was also lower, as it cut the price of its Golf model.
Asian markets finished mixed on Tuesday. In Japan, the Nikkei 225 index had its biggest drop since mid-December, slipping 224.83 points, or 2.07%, to 10,644.13. NEC and Hitachi, Japan's largest maker of electronics, dropped as a slide in the Nasdaq overnight raised concern that gains in technology stocks have outstripped their earnings potential, reports MarketScope. NEC, which added 78% in 2003, fell 3.6% on Tuesday, wiping out this year's gains. Hitachi shed 3.8%.
In Hong Kong, the Hang Seng index added 13.24 points, or 0.10%, to 13,778.31.