Stocks finished higher Tuesday, recovering from the previous session's late selling amid upbeat deal news and a decline in crude futures. Sentiment was optimistic toward first-quarter earnings, while interest rates and inflation will also be on the radar ahead of Friday's March labor report, says Standard & Poor's MarketScope.
The Dow Jones industrial average rose 58.91 points, or 0.53%, to 11,203.85, led by Caterpillar (CAT) and trailed by General Motors (GM). The broader Standard & Poor's 500 index added 8.12 points, or 0.63%, to 1,305.93. The tech-heavy Nasdaq composite was up 8.62 points, or 0.37%, to 2,345.36.
Equities have momentum on their side, some analysts say. "Long-term momentum for most markets has confirmed the recent highs, which is a positive," says Merrill Lynch senior international market analyst Walter Murphy. "However, the current overbought condition suggests the need for pullback within the context of the longer term uptrend."
Others say global markets could be poised for a pullback. "A sustained tightening in liquidity poses a key risk to the world's asset markets," says Adam Chester, chief treasury economist at HBOS Treasury Services. "Over the past few years, the unprecedented easing in monetary policy across the U.S., Europe and Asia has driven not only bond and equity markets sharply higher, but also energy, precious metals and global house prices. Could this now be coming to an end?"
Investors were digesting deal news Tuesday in a session light on data and earnings reports. Computer Sciences (CSC) was higher on news the computer services company is mulling a possible sale. The company also reportedly will cut 5,000 jobs in a restructuring plan to save $450 million.
Meanwhile, Citigroup (C) was higher after the Federal Reserve Bank of New York freed the financial giant from a year-long ban on large mergers.
Diversified manufacturer 3M (MMM) rose on news it may sell its $1 billion branded pharmaceutical business.
Also in pharmaceuticals, Merck (MRK) was higher on a first-quarter earnings forecast of 71 cents to 75 cents, excluding restruction charges.
On the downside, computer maker Apple(AAPL) was lower after Lehman Brothers trimmed its price target on the shares from $80 to $73, citing March sales weakness.
Video-rental chain Blockbuster (BBI) was lower after billionaire investor Carl Icahn reportedly retreated from a threat to seek control of the company.
Elsewhere, Merrill Lynch (MER) was higher even though the financial services giant said it anticipates taking a $1.2 billion charge tied to new accounting rules.
Tech bellwether Google (GOOG) rose, reportedly on optimism about upcoming quarterly earnings.
A quiet economic schedule Tuesday will be followed on Wednesday by the Institute of Supply Management's index on the services industry for March, expected at 59.0 after February's level of 60.1. Thursday brings the weekly jobless claims report, ahead of the key March labor report Friday.
In the energy markets Tuesday, May West Texas Intermediate crude oil futures closed down 51 cents at $66.23 a barrel. The decline came amid expectations of mild temperatures and higher inventories, says Action Economics.
European markets finished lower. In London, the Financial Times-Stock Exchange 100 index fell 19.6 points, or 0.33%, to 6,004.7. Germany's DAX index edged lower 10.2 points, or 0.17%, to 6,013.85. In Paris, the CAC 40 index was down 49.45 points, or 0.94%, to 5,205.81.
Asian markets finished mixed. Japan's Nikkei 225 index slipped 40.4 points, or 0.23%, to 17,292.91. In Hong Kong, the Hang Seng index nudged higher by 36.34 points, or 0.23%, to 16,100.09. Korea's Kospi index gained 5.89 points, or 0.43%, to 1,385.64.
Prices for 10-year Treasury notes edged lower to 97-05/32 with a yield of 4.87%, while 30-year bonds fell to 93-20/32 for a yield of 4.91%. The bearish bias in the bond market persisted ahead of Friday's labor report, says S&P MarketScope.