Traders weighed declines in a home-price index and a consumer confidence gauge as the Fed began its two-day policy meeting
Stocks closed mixed Tuesday as investors awaited Wednesday's outcome of the Federal Reserve policy meeting. Airlines and other transportation stocks were among the session's best performers as oil prices pulled back from recent highs.
The financial markets widely expect the Federal Reserve to lower its target on the federal funds rate by 25 basis points to 2.0% on Wednesday. Speculation is growing that the Fed will indicate a bias toward pausing in June in order to observe incoming data and assess the economic situation after an aggressive monetary easing course since last summer.
Pharmaceutical stocks sank on news of regulatory setbacks for two drugs. Merck (MRK) was down following the rejection of a cholesterol drug by an FDA panel. Genentech (DNA) and Biogen Idec (BIIB) fell after the companies announced that a Phase II/III study of Rituxan systemic lupus did not meet its primary endpoint.
Oil stocks were higher on strong earnings reports from industry players as President Bush blasted Congress for blocking energy legislation. S&P MarketScope noted “some end of month portfolio adjusting” in Tuesday’s session.
Bonds were higher, as was the dollar index. Gold futures were lower.
On Tuesday, the blue-chip Dow Jones industrial average fell 39.81 points, or 0.31%, to 12,831.94. The broader S&P 500 index declined 5.43 points, or 0.39%, to 1,390.94. The tech-heavy Nasdaq composite index added 1.70 points, or 0.07%, to 2,426.10.
On the New York Stock Exchange, 18 stocks fell in price for every 13 that advanced. The ratio on the Nasdaq was 17-12 negative. Trading was slow.
The U.S. S&P/Case-Shiller home price index (20 cities) fell 2.6% from the preceding month to 175.94 in February, and is now down a record 12.7% over last year. This comes after a 10.7% plunge in January. All 20 cities posted declines over last month, with weakness paced by a 5.0% monthly decline in San Francisco, a 4.8% drop in Las Vegas, and a 4.3% drop in Los Angeles. Only one city showed a year-over-year increase -- Charlotte (+1.5%). Ten of the 20 cities in the index have seen double-digit year-over-year price declines. The biggest declines were in Phoenix, Miami and Las Vegas, down 20.8%, 21.7% and 22.8%, respectively.
The data give more evidence that the housing crisis is still getting worse, as the pace of house price declines continues to accelerate, says S&P Economics.
U.S. consumer confidence slid lower to 62.3 in April, from a revised 65.9 in March (64.5 previously). It was 106.3 a year ago. This is a fourth straight monthly decline, though it's not quite as bad as the sub-60 figure rumored just ahead of the release, according to Action Economics. The present situations index dropped to 80.7 from 90.6 in March (revised from 89.2). The expectations index inched up to 50.1 from 49.4 (revised from 47.9). Meanwhile, the year-ahead average inflation index climbed to 6.8% from 6.1% in March. It was 5.1% a year ago. The labor differential (jobs plentiful minus jobs hard to get) plunged to -11.5, from -5.3.
Traders will get additional word on the health of the U.S. economy Wednesday with the release of advance first quarter gross domestic product, which analysts expect to rise 0.5%.
In remarks Tuesday, President Bush blasted Congress for blocking his proposals to deal with high gas prices and dragging its feet on legislation to make more student loans available and ease the mortgage crunch. He defended his ethanol programs and said many problems would be solved if Congress would pass ANWAR legislation. Bush told a Rose Garden news conference it's a "tough time for our economy." He said Americans were "understandably anxious" about the economy. He also said, however, that "all they're getting is delay" from Washington. Bush has long sought increased investment in alternative energy sources. The White House has acknowledged the measure would do nothing to address the current energy price squeeze affecting consumers.
June WTI crude oil futures last traded down $3.11 per barrel at $115.64, after ranging between $114.95 and $117.40 in NYMEX trading. According to an Energy Information Agency report, February oil demand was 7% or 756,000 barrels a day less than a year ago. At same time, North Sea oil output has just about returned to normal as workers at the Ineos-owned Grangemouth refinery in Scotland returned to work early today after a two day-strike. And there were reports of talks beginning to end Nigerian strike against Exxon Mobil (ENR). Speculators look to be bailing out, also, since crude could not break through the $120 level when conditions were ripe, according to S&P MarketScope.
Among Tuesday’s stocks in the news, Energizer Holdings (ENR) shares fell after the company reported second quarter EPS of $1.03, vs. $1.14 one year earlier, as higher costs offset a 30% sales rise.
Shares of Lear Corp. (LEA) soared after the company reported first-quarter EPS of $1.00, vs. 64 cents one year earlier, as lower costs offset a 12% revenue decline. The company expects 2008 net sales of approximately $15.5 bilion, compared with prior guidance of $15.0 billion.
MasterCard (MA) shares shot higher after the company posted first-quarter GAAP EPS of $3.38, vs. $1.57 one year earlier, on 29% higher net revenue. The company says currency fluctuations (driven by movement of the euro and the Brazilian real relative to the U.S. dollar) contributed 5.1% of the increase in net revenue for the quarter.
Visa Inc. (V) reported second-quarter adjusted EPS (Cl. A shares) of 52 cents on revenue of $1.5 billion. The company says its financial outlook over the next three years includes the following metrics: annual net revenue growth of 11%-15%; annual adjusted operating margin in the low 40% range; annual adjusted EPS growth of 20% or greater; and annual free cash flow in excess of $1 billion.
Corning (GLW) reported first-quarter EPS of 44 cents (excluding a special item), vs. 40 cents one year earlier, on a 24% sales rise. The company sees second-quarter EPS of 47-50 cents (excluding a special item) on $1.71-$1.75 billion in sales.
Archer-Daniels-Midland (ADM) reported third-quarter EPS of 80 cents, vs. 56 cents, on a 64% revenue rise.
Treasuries rose for a second consecutive day on the back of short covering prior to the releases of preliminary firs-quarter GDP and the FOMC policy statement Wednesday. The 10-year note rose 05/32 in price to 97-16/32 for a yield of 3.81%. The 30-year bond climbed 10/32 to 97-09/32 for a yield of 4.54%.