Despite a gloomy earnings season and fears that an economic rebound is still far away, buyers looking for bargains emerged to help stocks finish higher on Wednesday.
The second-quarter earnings season is in full swing as some 300 companies will issue earnings reports this week, and more than 1,200 will report earnings the following week. However, warnings of lower earnings and difficult times ahead are the norm in Corporate America. The onslaught of poor corporate results and a lack of a stimulating effect from the Federal Reserve's rate cuts have kept the majority of investors at bay.
"The news is generally pretty bad," Richard Gould of Rockland Small-Cap Growth Fund (RKGBX) told S&P's AdvisorInsight. "Things are especially weak on the tech side, but it is vacation time right now, and the summer is a little slow. A lot of the action on stocks is very erratic now, but come autumn it usually firms up," Gould predicts.
Personal computer maker Compaq (CPQ) was the latest technology giant to issue a profit warning. After the market close Tuesday, Compaq said second-quarter revenue would be around $8.4 billion, 9% below the first quarter's $9 billion. The No.2 PC maker blamed economic conditions in Europe, and said it expects job cuts for this year to total 8,500. The company has cut 3,500 jobs so far this year. Shares of Compaq ended higher. Other tech winners include International Business Machines Corp. (IBM) and SBC Communications Inc. (SBC).
Other stocks in the news Wednesday included jewelry retailer Tiffany & Co. (TIF) and software maker Comverse Technology Inc. (CMVT). Both companies lowered their earnings outlook.
The Dow ended up 65.38 points, or 0.64%, to 10,241.02. The Nasdaq Composite closed relatively flat, up 9.23 points, or 0.47%, to 1,972.02. Meanwhile, the broader S&P 500 index lost 1.34 points, or 0.11%, to 1,180.18.
U.S. Treasuries finished lower, as stocks edged higher. Looking ahead, traders will look to several reports for clues about the economy. Reports include those on retail sales, the producer price index and consumer price index, both gauges of inflation, and the University of Michigan consumer sentiment.
European stock markets ended lower amid downgrades in banks and continued concerns about shabby profits at tech companies. In London, the Financial Times 100 Index was off 76.00 points, or 1.39% to 5,391.90. In France, the CAC 40 was down 58.72 points, or 1.18%, to 4,914.68. Germany's DAX Index dropped 14.52 points, or 0.25%, to 5,801.80.
Asian markets also ended lower. In Japan, the Nikkei Index tumbled 295.30 points, or 2.40%, to close at 12,005.11. The Japanese market was hit by comments from technology firms abroad, a suffering economy at home and selloffs in tech concerns such as Hitachi Ltd. Meanwhile, Hong Kong's Hang Seng Index fell 186.00 points, or 1.46% to finish at 12,527.90. By Amy Tsao in New York