U.S. stocks closed narrowly mixed in light trading Wednesday, partially pulling back from two days of solid gains. Investors nervously awaited Alcoa's (AA) third-quarter earnings report, due after the closing bell, for hints as to whether the latest earnings season would be robust and support investors' expectations for an economic rebound.
After the close of trading Wednesday, the aluminum giant said it returned to profitability after three consecutive quarterly losses, helped by cost-cutting and rising orders from automakers and other big manufacturers. Alcoa reported a third-quarter profit of $77 million, or 8 cents per share. Excluding restructuring charges, Alcoa's earnings in the latest quarter amounted to 4 cents per share, easily beating expectations of a loss of 9 cents on revenue of $4.55 billion.
On Wednesday, the 30-stock Dow Jones industrial average ended lower by 5.67 points, or 0.06%, at 9,725.58. The broad Standard & Poor's 500-stock index gained 2.86 points, or 0.27%, to 1,057.58. The tech-heavy Nasdaq composite index added 6.76 points, or 0.32%, to 2,110.33.
On the New York Stock Exchange, 16 stocks were higher in price for every 14 that declined. Breadth on the Nasdaq was flat. Trading was choppy, suggesting that some investors were buying on dips, says S&P MarketScope.
Earnings season officially kicks off Wednesday afternoon with the release of Alcoa's third-quarter numbers.
Treasuries moved solidly higher after the government's strong $20 billion 10-year note auction.
The dollar index rose in a rebound from its recent weakness.
Gold futures edged higher.
Oil futures fell after after the energy Dept.'s weekly inventory report showed crude oil stocks fell 1.0 million barrels, gasoline rose 2.9 million barrels, and distillates rose 700,000 barrels.
European stocks finished lower, with benchmark indexes declining 0.57% in London, 0.37% in Paris, and 0.30% in Frankfurt.
Tokyo stocks rose 1.11%, Hong Kong stocks rose 2.07%, while markets in Shanghai were closed for a holiday.
Wednesday's session featured two closely watched initial public offerings. Of the two new issues, Verisk (VRSK) was the more impressive performer. Shares of the largest provider of data to the property and casualty insurance sector opened at $27 each, $5 above their IPO price and trading as high at $28.97. In afternoon trading, the stock rose $5.43, or 25%, to $27.43.
Shares of Banco Santander Brasil (BSBR), were not performing as well, falling in their first day of trading. American Depository Receipts trading in the U.S. dropped 35 cents, or 2.6%, to $13.05 in afternoon trading.
Bloomberg News reported Wednesday that Kansas City Fed President Thomas Hoenig said the central bank should start raising interest rates "sooner rather than later," and such tightening wouldn't derail the U.S. economic recovery. "Even if we were to start immediately, much time would pass before incremental increases could be considered tight or even neutral policy," Hoenig said. "I would not support a tight monetary policy in the current environment, but my experience tells me that we will need to remove our very accommodative policy sooner rather than later."
Reuters reported Treasury Secretary Timothy Geithner was quoted by the German weekly Die Zeit as saying "Everyone is going to have to come to terms with the fact that we are going to save more in the United States. If the U.S. starts saving more. that changes the whole world's economic reality," He said the Chinese "government is at the forefront of thinking about new ways to reduce the dependence of the economy on export and investments," he said. "But it is not just about the U.S. and China. Europe and Japan make up 40 percent of the global economy."
The ABC News consumer comfort index rose 1 point to -45 in the week ended Oct. 4. The survey showed 11% of respondents expressed confidence in the economy, up from 10% the week before. Also, 44% of those polled said their own finances were in good standing, down from 45% the prior week. In assessing the buying climate, 27% of respondents said it was good, up from 26% a week earlier.
Bloomberg News reported Europe's economy contracted more than estimated in the second quarter as consumer spending, investment and exports were weaker than earlier reported. Gross domestic product in the 16-nation euro region fell 0.2% from the first quarter, when it dropped 2.5%, the European Union's statistics office in Luxembourg said. The decline was sharper than the 0.1% decline estimated on Sept. 2.
Japan's August leading economic index rose 0.8%, month-over-month, for a sixth straight monthly increase.
In company news Wednesday, Monsanto (MON) reported fourth-quarter ongoing earnings per share (EPS) of $0.02, vs. a $0.03 loss per share one year earlier, despite 8.4% lower total sales. The company reaffirmed its fiscal 2010 ongoing EPS guidance in the range of $3.10-$3.30, with free cash flow in the range of $900 million-$1 billion.
Costco Wholesale (COST) reported fourth-quarter EPS of $0.85, vs. $0.90 EPS one year earlier, on a 5% same-store sales drop and a 3.1% total revenue drop. Wall Street was looking for EPS of $0.77.
Yum Brands (YUM) reported third-quarter EPS of $0.70, vs. $0.58 EPS one year earlier (excluding special items), on 4.0% systemwide sales growth. The company raised its 2009 EPS forecast to $2.14 from $2.10, prior to special items, driven by stronger-than-expected full year performance in China and a lower-than-expected full year effective tax rate. It expects to deliver 10% EPS growth in 2010.
Family Dollar Stores (FDO) reported fourth-quarter EPS of $0.43, vs. $0.38 EPS one year earlier, on 1.0% higher same-store sales and 2.6% higher total sales. Wall Street was looking for $0.41 EPS. The company sees 3%-5% first-quarter same-store sales rise , a 5%-7% total sales rise, and $0.45-$0.50 EPS.
Ciena Corp. (CIEN) announced that it has entered into agreements with Nortel to buy substantially all of the optical networking and carrier Ethernet assets of Nortel's Metro Ethernet Networks business for $390 million in cash and 10 million shares of Ciena common stock.
Sunoco (SUN) said it will reduce its quarterly dividend to $0.15 from $0.30, beginning in the 2010 first quarter. It also says it is indefinitely idling all process units at its Eagle Point refinery located in Westville, N.J. in an effort to reduce losses in its refining business. Sunoco expects to incur pretax charges, the majority of which are non-cash, of about $475 million-$550 million related primarily to asset impairment as well as idling costs.
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