Stocks Finish Mixed

The market eyed a surprising improvement in the U.S. trade deficit, and Intel's earnings release after the closing bell

Stocks finished mixed on Tuesday, in light-volume trading, as traders continued their chip sector vigil for a second day ahead of Intel's (INTC ) earnings release after the closing bell. A better-than-expected read of May's U.S. trade deficit failed to boost sentiment dramatically.

The Dow Jones industrial average added 9.37 points, or 0.09%, to 10,247.59. The broader Standard & Poor's 500 index added 0.78 point, to 1,115.13. The tech-heavy Nasdaq composite index finished down 5.26 points, or 0.27%, to 1,931.66.

Managed health care and general merchandise groups made gains, while electronics rebounded from their Monday losses. Drug retailers also rose as CVS (CVS ) posted higher June and second-quarter same-store sales and total sales. CVS finished the day up 2.8%

In corporate news, the semiconductor sector remained in focus as traders set themselves up for industry leader Intel's post-session earnings results. After the close of trading, Intel announced second-quarter earnings of 27 cents per share, vs. 14 cents in the same period in 2003, on an 18% rise in revenues. The profit figure was in line with Wall Street expectations. The company says its third-quarter revenue will come in between $8.6 billion and $9.2 billion. The shares moved lower in after-hours trading.

On Monday, a Merrill Lynch downgrade of the semiconductor sector -- and a lowered investment rating on Intel -- had weighed on sentiment.

Elsewhere in semiconductors, Europe's Philips Electronics (PHG ) reported net income of 48 euro cents per share, vs. 3 euro cents one year earlier. Philips finished higher.

And in an apparent setback to the group, LSI Logic (LSI ) says that due to softer-than-anticipated demand for semiconductors, it now expects its second quarter revenues to arrive at $448 million, down from its previous guidance of an upward range of $470 million. LSI still sees its second-quarter EPS between a penny and 3 cents (GAAP). S&P cut its rating to hold from accumulate, while Schwab SoundView kept its outperform rating. The stock rose 3.7%.

Elsewhere in corporate news, Compuware (CPWR ) sees worse-than-expected first-quarter revenue of $286 million, and breakeven EPS. Compuware cites lower-than-expected new software license sales, though it still expects to meet its fiscal 2005 guidance. S&P maintains its hold rating, while First Albany downgraded the stock to neutral. The stock lost 9.8%.

Red Hat (RHAT ) suffered Tuesday, down 23%, on news that the Linux software outfit will restate its financial results for its fiscal 2002 through the first quarter of fiscal 2005 due to changes in revenue recognition for certain subscription agreements. The company says it is in the process of responding to comments and questions from the Securities and Exchange Commission regarding its annual report.

Delta Air Lines (DAL ) pressed airlines lower. Delta stock slid 9.8% after announcing two, non-cash charges totaling $1.65 billion.

Brokerage Merrill Lynch (MER ) posted second-quarter EPS of $1.06, vs. $1.00, on a slight net revenue rise, 14% higher commissions revenue, and 9% higher investment banking revenue. Shares finished 3.2% lower.

In health care, Johnson & Johnson (JNJ ) reported second-quarter earnings of 82 cents per share, vs. 40 cents in the same period in 2003, on an 11.1% jump in sales. Shares ended higher.

In economic news, the trade deficit for May narrowed somewhat, arriving at $46 billion, vs. expectations of a $48.5 billion gap. The April deficit was revised lower to $48.1 billion, from a prior $48.3 billion reading. "The cumulative impact is a smaller drag on GDP than was thought," says economic research firm, Informa Global Markets.

Imports rose 0.4% and exports rose 2.9%. Capital goods exports were up 6.3%, including a 19.8% rise in aircraft exports. On the import side, crude oil fell 0.2% and consumer goods dipped 3.0% lower.

Investors aren't likely to break from recent low-volume, narrow-range trading until there's a more solid consensus on corporate earnings results. Peter Cardillo, chief market analyst, at S.W. Bach, notes that "investors...need to be sure that Corporate America isn't worried about economic conditions, nor that the Fed is starting to raise interest rates."

And there's plenty to digest during the rest of the week. Traders still have to weigh a slew of reports on earnings and the economy -- the weightiest of which will be unveiled toward the end of the week. The latest readings on producer price index, initial claims, capacity utilization and Philadelphia Fed index are due Thursday. Friday brings and update on the consumer price index and University of Michigan consumer sentiment.

Major earnings updates during the week include Harley-Davidson (HDI ) and Apple (APPL ) on Wednesday. Citigroup (C ), PepsiCo (PEP ), IBM (IBM ), UnitedHealth Group (UNH ) and Nokia (NOK ) are set to report Thursday.

Treasury Market

Prices of Treasury issues finished lower Tuesday, after being under pressure most of the day, reports Informa. The 10-year note yield was up to 4.495%, up from 4.41% yesterday.

Meanwhile, the dollar enjoyed a mild rebound vs. major currencies. The euro was at $1.231 and the British pound was at $1.855. The dollar was trading at 109.24 yen. As a result of the dollar's strength, gold ended the day down $6.10.

World Markets

European stock markets finished mixed on Tuesday. London's Financial Times-Stock Exchange 100 index has dipped 2.3 points lower, or 0.05%, to 4,357.70. The U.K. government reported that U.K. consumer prices fell 0.1% in June.

Germany's DAX index added 7.36 points, or 0.19%, to 3,900.60. Traders were encouraged by higher automakers' sales and a report that German June wholesale prices index fell 0.2%.

In Paris, the CAC 40 was up 7.04 points, or 0.19%, to 3,658.67.

Asian stock markets finished mixed. Japan's Nikkei 225 index added 26.34 points, or 0.23%, to 11,608.62, as traders showed optimism about the domestic economic recovery, reports S&P's MarketScope. The Bank of Japan also left its monetary policy unchanged, saying that mild deflation will persist throughout the current fiscal year.

In Hong Kong, the Hang Seng index slipped 112.68 points lower, or 0.92%, to finish at 12,078.33, following the Nasdaq's tech slide on Monday in New York.