Stocks finished higher Tuesday, extending recent gains after the market overcame some occasional bouts of profit taking.
On Tuesday, the 30-stock Dow Jones industrial average rose 33.63 points, or 0.36%, to 9,320.19. The broad Standard & Poor's 500-stock index gained 3.02 points, or 0.30%, to 1,005.65. And the tech-heavy Nasdaq composite index edged up 2.70 points, or 0.13%, to 2,011.31.
The S&P 500 and Nasdaq managed to stay above 1,000 and 2,000, respectively, after surpassing those levels Monday for the first time since last autumn amid a report showing a pickup in manufacturing activity and optimism about an economic recovery. Panic buying may come from investors who have missed out on the rally that began in March, says S&P MarketScope.
Treasuries finished lower after starting higher on Tuesday. The dollar index edged higher, sending gold lower. Oil futures were mixed before tomorrow's inventory data.
In economic news Tuesday, consumer spending rose 0.4% in June, while personal income dropped 1.3% after rising 1.3% in May. The data are roughly in line with the consensus estimates of 0.3% and negative 1.0%, respectively. The personal income swing was caused by tax rebate payments in May, which caused that month to jump. The saving rate has dropped back down to 4.6% from 6.2% in May, as expected. "Overall, the report shows a somewhat healthier consumer than we had previously thought, and is thus optimistic for future growth, with the third quarter now likely to be slightly positive for GDP," says David Wyss, chief economist at Standard & Poor's.
Also, pending home sales for June rose 3.6% -- the fifth straight monthly gain.
Wednesday's reports include ADP Employment, ISM Services and factory orders.
The Wall Street Journal reported that the Securities and Exchange Commission may clamp down on flash trading, a practice that some critics say gives an unfair advantage to some traders by giving them an early look at buy and sell orders. The newspaper reports that SEC Chairman Mary Schapiro said she has instructed SEC staff to explore "an approach that can be quickly implemented to eliminate the inequity that results from flash orders." Flash trading, which routes stock trades through private liquidity pools before being sent to other exchanges for filing, has come under increasing fire from critics in Congress and elsewhere in recent weeks. "Under the rule-making process, such a proposal to eliminate the ability to flash orders would need to be approved by the commission and be open to public comment," she said.
Most major U.S. stock exchanges have said they would not protest if the SEC moves to curb some of these practices. In a statement, Sen. Charles Schumer (D., N.Y.) said he spoke with Schapiro, who informed him of an imminent ban during a telephone call Monday. The ban will come as part of a broader look at dark pools -- electronic trading venues where money managers trade large blocks of shares anonymously -- and high-frequency trading, he said.
Among stocks in the news Tuesday, General Electric (GE) reached a settlement with the SEC, without admitting or denying allegations of any wrongdoing, agreeing to pay civil penalty of $50 million. This concludes the SEC's investigation of accounting issues at GE relating to four accounting matters in 2002 and 2003. GE has previously corrected for the effects of these matters in its financial statements in SEC filings made between May 2005 and February 2008. No further corrections are required.
Caterpillar (CAT) reaffirmed its 2009 guidance for revenue of $32-$36 billion and EPS of $1.15-$2.25 excluding redundancy costs. The company also forecasted EPS in the $8-$10 range within five years, if the global economy experiences a "normal" recovery cycle.
PepsiCo (PEP) agreed to buy its two biggest bottlers, Pepsi Bottling Group (PBG) and PepsiAmericas (PAS), for $7.8 billion. The world's second-biggest drink maker said Tuesday it will pay $36.50 per share for Pepsi Bottling Group and $28.50 per share for PepsiAmericas. Both offers are half stock and half cash. The bottlers had rejected an earlier buyout offer worth a total of $6 billion, saying it undervalued them. UBS AG (UBS) posted CHF 0.39 second quarter loss, vs. CHF 0.16 loss a year ago, on 66% drop in interest income. The Swiss bank says results include an own credit charge of CHF 1.213 billion, restructuring charges of CHF 582 million and a goodwill impairment charge of CHF 492 million related to the announced sale of UBS Pactual. It says in spite of positive economic signs, the overall economic environment in most of the regions in which it operates remains recessionary; says sustainable recovery is not yet visible.
Cognizant Technology Solutions (CTSH) reported $0.50, vs. $0.39, second quarter non-GAAP EPS on 13% revenue rise. It sees third quarter revenue of at least $800 million, $0.44 non-GAAP EPS. It raised 2009 revenue growth guidance from at least 10% to at least 11.5%; now expects 2009 revenue of at least $3.14B, at least $1.80 non-GAAP EPS.
Marvel Entertainment (MVL) posted $0.37, vs. $0.59, second quarter EPS on 26% sales decline. The Street was looking for $0.31. It raised the low end of its sales and EPS guidance for 2009; it now sees $1.25-$1.35 EPS on $465-$485 million revenue vs. prior guidance of $1.10-$1.35 EPS on $450-$485 million revenue.
Tenet Healthcare (THC) reported a second quarter loss of $0.03 per share, which was $0.02 short of the First Call consensus that expected a loss of a penny per share. Revenue declined 5.5% year-over-year to $2.23 billion vs. the $2.22 billion consensus. The company sees fiscal year 2009 loss of $0.08 to $0.01 per share (analyts expect a loss of $0.01) and revenue of $8.9 billion to $9.1 billion (vs. the $8.98 billion consensus).
Pulte Homes (PHM) posted $0.74 second quarter loss, vs. $0.63 loss, on 58% revenue decline. Lower revenues for the quarter primarily reflect a year-over-year decline in homes closed in the quarter, combined with a decrease in average selling price.
Archer-Daniels-Midland (ADM) posted $0.10, vs. $0.58, fourth quarter EPS on 24% drop in sales and other operating income.
CVS Caremark (CVS) posted $0.65, vs. $0.60, second quarter adjusted EPS from continued operations on 18% revenue rise. Given its strong performance year to date and optimism for the rest of the year, it raises its EPS guidance and narrows range. The drug store operator now expects to deliver 2009 adjusted EPS from continuing operations of $2.59-$2.64, up from previous guidance of $2.55-$2.63.