Stocks ended modestly higher on Tuesday after a report showing consumer confidence is improving and as the Federal Reserve began meeting to consider increasing interest rates.
The Dow Jones industrial average added 56.34 points, or 0.54%, to 10,413.43. The broader Standard & Poor's 500 index was up 2.85 points, or 0.25%, to 1,136.23. The tech-heavy Nasdaq composite index gained 15.11 points, or 0.75%, to 2,034.93.
Investors were looking ahead to Wednesday when the Federal Reserve's interest-rate setting arm, the Federal Open Market Committee, is expected to raise the benchmark federal funds target rate by a quarter percentage point to 1.25%. The FOMC began meeting on Tuesday.
Though the Central Bank's decision will take center stage, investors will also turn their attention to a gauge of regional manufacturing index in June. The Chicago Purchasing Manger's Index is expected to ease to 64.5 from 68.0 in the previous month. Still, any number over 60 is considered an expansion.
Wednesday is also expected to be fairly busy on the corporate earnings front with results scheduled from housing-finance firm Freddie Mac (FRE), food outfit General Mills (GIS) and agro concern Monsanto (MON).
Stoking the market on Tuesday was news that the Conference Board's index of consumer confidence surged to 101.9 for June, the highest reading since mid-2002, vs. a prior 93.1, according to Informa Global Markets.
Michael Wallace, global market strategist for Action Economics, says the inflation risk at this point remains modest but that he foresees only modest hikes in interest rates in the next few months to make sure the economy keeps on growing without overheating.
Greenspan's insistence on a flexible risk-management approach to policy, and his singling out domestic terrorism as a specific event risk worthy of Fed attention, suggests that "the Fed will err on the side of sustainable growth for now, over inflation," Wallace says. "That still likely means a series of quarter point hikes through year-end, with a brief pause for national elections in November."
In stocks news, Washington Mutual (WM), the largest U.S. savings and loan outfit, warned rising long-term interest rates was leading it to cut its 2004 profit forecast.
Elsewhere in the financial sector, New York Community Bancorp (NYB) was higher Tuesday on reports Citigroup (C) is looking to buy the bank in a deal valued at $6 billion.
Long-distance carrier AT&T (T) plans to scale back its consumer phone business further after already saying it would stop adding residential customers in some markets, according to an article in The Wall Street Journal.
Energy-services firm Halliburton (HAL) warned it expects to record additional operating losses of $200 million in the second quarter because of higher cost estimates and delays connected with a deepwater oil project in Brazil.
At least one retailer had some bad news. Target (TGT) warned June sales would be weaker than expected.
Greeting cards outfit American Greetings (AM) posted 78% lower earnings because of costs associated with buying back debt.
Spice maker McCormick & Co (MKC) reported its quarterly earnings rose 7% thanks to its purchase of the Zatarain's food brand and a lawsuit settlement.
Meanwhile, oil futures remain under pressure, with August crude futures on NYMEX dipping below $36 a barrel. This should provide support to stocks, notes Standard & Poor's MarketScope.
Treasuries ended slightly higher in price Tuesday afternoon. Trading was light as market players await the Fed's decision on interest rates.
European stock markets closed mixed on Tuesday. London's FTSE 100 index was off 6.30 points, or 0.14%, to 4,512.40 U.K. consumer confidence tumbled to -4 in June from -2 in May, putting the confidence index at its lowest level since December. Analysts had predicted a reading of -2. Anglo American, Antofagasta, and Rio Tinto were lower on fears of weakening commodity demand in China. Gallaher was lower on difficult trading conditions in Continental Europe.
Germany's DAX index gained 0.38 points, or 0.01%, to 4,069.73 as the IWH Institute raised its German 2004 growth forecast to 1.8% and predicted similar growth in 2005. German builders are hoping to end their slump next year. Lufthansa was higher as it plans to bid for a 1 billion euro NATO contract together with EADS, which was also higher.
In Paris, the CAC 40 index eased 15.10 points, or 0.40%, to 3,756.48 even though French Business Confidence rose to a three-year high in June. But factory prices rose for a fifth consecutive month due to high oil prices. Axa, Credit Agricole, and Societe Generale were lower on higher rate worries. France Telecom was higher on a report that it will buy the rest of Wanadoo shares it does not own.
Asian markets finished lower on Tuesday. In Japan, the Nikkei index lost 23.25 points, or 0.20%, to close at 11,860.81 as investors sold recent gainers on dampened sentiment over disappointing industrial output data. Industrial production rose 0.5% in May from April, which was sharply below expectations of around 2.5%. Separately, the jobless rate fell to 4.6% in May, its lowest level since August, 2000, from 4.7% in April.
Tech names mirrored losses in U.S. peers in the Monday session, with Fujitsu down 0.9% while Advantest slipped 1.23%. But shares of Mitsubishi Motors surged over 6.43% on news that it planned to raise its financial rescue package to up to 546 billion yen from 450 billion yen, with JP Morgan Chase investing an extra 50 billion yen.
In Hong Kong, the Hang Seng index gave up 78.30 points, or 0.64%, to close at 12,116.30, mirroring losses on Wall Street overnight. Standard Chartered shares traded almost flat after it said on Monday that it bought Hong Kong lender Advantage for HK$980 million. S&P Ratings revised the outlook on Hong Kong's long-term local currency rating to stable from negative as the economy improves.