Major U.S. stock indexes closed mixed Wednesday, erasing earlier losses as bargain hunters emerged late in the session to snap up issues at prices that had been reduced in the previous two session.
Traders looked ahead to the launch of what promises to be a lackluster second-quarter earnings season. After the close of trading, Alcoa (AA), traditionally the first blue chip company out of the gate in the quarterly earnings derby, posted a third consecutive quarterly loss.
Amid the gloom, a few economists are looking for positive surprises this earnings season, notes S&P MarketScope.
On Wednesday, the 30-stock Dow Jones industrial average finished higher by 14.81 points, or 0.80%, at 8,178.41. The broad Standard & Poor's 500-stock index fell 1.47 points, or 0.17%, to 879.56. The tech-heavy Nasdaq composite index added 1.00 points, or 0.06%, to 1,747.17.
Activity in the broader market was negative. On the New York Stock Exchange, 20 stocks were lower in price for every 10 that advanced. Nasdaq breadth was 18-9 negative.
Treasuries soared Wednesday after a successful auction of $19 billion of 10-year notes. The dollar index eased as representatives of the Group of 8 industrialized nations met in Italy. Gold futures were lower.
Crude oil futures fell below $61 per barrel after an Energy Dept. report that showed crude oil stocks fell 2.9 million barrels, gasoline stocks rose 1.9 million barrels and distillates rose 3.7 million barrels. Also weighing on prices were reports the CFTC is considering limits on commodity speculators, and France and England were calling for more supervision of speculative trading.
Commodities-related issues fell in step with a drop in oil and gold prices.
"Looking at oil prices, equities, and Treasuries, it appears the markets are coming to decision that economic recovery may still be a ways off," says Action Economics.
Alcoa announced a second quarter loss from continuing operations of $312 million, or $0.32 per share. Excluding restructuring charges, the loss was $256 million, or $0.26 per share. Alcoa noted that the loss from continuing operations represented a $168 million improvement over the first quarter loss of $480 million, or $0.59 per share.
Earnings from continuing operations in the second quarter of 2008 were $553 million, or $0.67 per share.
Revenues for the quarter were $4.2 billion, a two percent increase from the first quarter of 2009, but a decrease from the $7.2 billion in the second quarter of 2008, as a result of the impact of lower metal prices and the Company’s curtailment of aluminum and alumina production in response to reduced demand.
Alcoa shares, which rose 0.53% in Wednesday's regular session, were off 0.44% after the bell.
Telecom issues were lower in price in Wednesday's session amid reports the government is considering antitrust action against companies such as Verizon Communications (VZ) and AT&T (T).
In a direct challenge to Microsoft (MSFT), Google (GOOG) announced late Tuesday that it is developing an operating system for PCs that is tied to its Chrome Web browser. The New York Times reported the software, called the Google Chrome Operating System, is initially intended for use in the tiny, low-cost portable computers known as netbooks, which have been selling quickly even as demand for other PCs has plummeted. Google said it believed the software would also be able to power full-fledged PCs. The move is likely to sharpen the already intense competition between Google and Microsoft, whose Windows operating system controls the basic functions of the vast majority of personal computers.3M Corp. (MMM) shares gained 0.44% Wednesday after the company settled an investor lawsuit on derivatives.
Amgen (AMGN) shares surged 14% Wednesday on positive trial results for its cancer drug denosumab.
G8 leaders believe the world economy still faces "significant risks" and may need further help, according to summit draft documents that also reflect failure to agree climate change goals for 2050. Progress on the environment was impeded by Chinese President Hu Jintao returning home due to unrest in northwestern China. Before he left, summit host Silvio Berlusconi spoke of Chinese "resistance" on climate goals. Documents seen by Reuters before the G8 summit began cautioned that "significant risks remain to economic and financial stability" while "exit strategies" from pro-growth packages should be unwound only "once recovery is assured."
Treasury Secretary Timothy Geithner urged lawmakers to quickly pass legislation enacting President Barack Obama's overhaul of U.S. financial rules, as Democrats pushed back on plans to expand the Federal Reserve's powers. Bloomberg News reported that Geithner, in a two-hour, private meeting with members of the House Financial Services Committee in Washington. Geithner outlined the Obama administration's plan, which would create a Consumer Financial Protection Agency, establish a new authority to unwind large financial institutions and merge two banking agencies into a single regulator. The Treasury secretary, who didn't speak to reporters, attended the briefing as Congress holds hearings to turn the plan into legislation.
In economic news Wednesday, the IMF said it expects the U.S. economy to shrink by 2.6% this year, a slight improvement from its earlier estimate of a 2.8% decline and in line with many private forecasts, the AP reported. The U.S. will grow 0.8% in 2010, the IMF said, up from its expectation of no growth in April.
The IMF said the global economy is beginning to pull out of recession but the recovery is expected to be sluggish. The IMF raised its forecast for growth in 2010 to a 2.5% rate, which is higher than the 1.9% growth rate forecast in April. China and India are both expected to grow faster than previously estimated, with China's growth forecast at 7.5% this year and India's economy to grow at a 5.4%.
The Mortgage Bankers Association's index of applications to purchase a home or refinance a loan increased 11% to 493.1 in the week ended July 3 from 444.8 in the prior week. The group's refinancing gauge surged 15%, while the index of purchases gained 6.7%, Bloomberg News reported. Foreclosure-driven declines in prices have brought more homes within reach of buyers who qualify for credit, helping to stabilize demand. At the same time, unemployment is rising and borrowing costs are edging back up, indicating any rebound for the housing industry will be slow to take hold.
The ABC News consumer comfort index fell one point to -52 in the week ended July 5 from -51 a week earlier. The survey said 8% of respondents expressed confidence in the economy, unchanged from the week before. Also, 42% of those polled said their own finances were in good standing, up from 39% in the prior week. In assessing the buying climate, 22% of respondents said it was good, down from 26% a week earlier. The consumer comfort index was based on a random survey of 1,000 respondents nationwide ended July 5.