The Dow Jones industrial average shed 5.41 points, or 0.05%, at 10,538.66. The broader Standard & Poor's 500 index inched up 1.46 points, or 0.13%, to 1,123.67. The tech-heavy Nasdaq composite index added 10.01 points, or 0.49%, to 2,057.37.
Strong sectors in Tuesday's session included homebuilding, restaurants and small-cap techs. Retail, gold, and oil drillers were among the weak performers.
Investors reacted negatively to the latest update on the Institute for Supply Management's non-manufacturing index. The figures were weaker than expected, with the headline index for December at 58.6, vs. an expectations of 61.8 reading.
"This is the lowest reading since May, so while still strong, it is a considerable disappointment," says MMS International, an economic research outfit. On a positive note, orders held up, at 61.2 vs. 60.1 and back orders rose to 55.5 from 52.5. The employment index fell to 54.0 from 54.9, while prices rose.
Still, economists are quick to point out that most other data point to continued recovery. Says investment bank UBS: "We believe the continued rise in the ISM manufacturing new orders component in December implies that the November dip is normal volatility, rather than the start of a new downtrend."
Investors get a break from scheduled economic updates Wednesday and Thursday. The highly awaited December employment report is due Friday.
Winemaker Constellation Brands (STZ
) reported a 29% increase in fiscal third-quarter earnings, to $83 million, after Tuesday's market close. Sales rose 34%, to $987 million.
Still, not much is on the slate for earnings updates until Dow member Alcoa (AA
) kicks of the earnings season in earnest on Thursday. Analysts predict a rise in EPS to $0.34, more than double the $0.16 the aluminum company reported in the same period a year ago.
Among companies making headlines, Wal-Mart (WMT
), a member of the Dow industrials, said that it board okayed a $7 billion share buyback plan to replace its previous $5 billion program.
In the tech sector, Gateway (GTW
) provided guidance late Monday. It expects revenues of $880 million in the fourth quarter, below the previous estimate of $925 million to $975 million, despite the holiday rush for digital cameras. The company said it sees an operating loss.
California Micro Devices (CAMD
) upped its third-quarter forecast on continued expectations that both revenue and net income will come in at record highs. The chipmaker expects to post earnings of between 8 and 10 cents a share compared to a prior outlook for between 6 and 9 cents a share. It sees revenue between $16.8 million and $17.2 million
Telecom equipment maker Adtran (ADTN
) guided that its fourth-quarter earnings rose 50% to 55%, on higher demand and market share. It expects to post earnings of 24 cents to 25 cents a share for the period, on revenue of $113.4 million.
Coffeehouse giant Starbucks (SBUX
) raised its full-year and fiscal first-quarter earnings guidance late Monday. It now expects earnings per share of 84 cents to 87 cents, up from the previous fiscal 2004 target of 83 cents to 85 cents per share. The company cited strong holiday sales.
U.S. Treasuries Tuesday held on to solid gains after a disappointing update on the services sector.
In other economic data, the ICSC-UBS retail chain store sales index slipped 0.1% for week ended Jan. 3.
Factory orders in November declined about 1.4%, vs. a revised 2.4% rise for October. The drop is largely in line with consensus forecast. Non-defense orders were off 1.3%, while orders excluding transports fell 1.5%.
The most eagerly anticipated report of the week is December payrolls, due on Friday. Eonomists are looking for signs of improvement in the unemployment rate, which has been holding stubbornly at 5.9%.
European stocks finished lower as the ongoing weakness of the dollar hurt prospects for major exporters like automakers. London's Financial Times-Stock Exchange 100 index slid 8.10 points, or 0.18%, at 4,505.20. In Paris, the CAC 40 fell 12.47 points, or 0.35%, at 3,595.82. Germany's DAX index eased 0.46 points, or 0.01%, to 4,035.44.
In Asia, stocks finished mixed. Japan's Nikkei 225 index, lost 11.18 points, or 0.10%, to 10,813.99, after Monday's strong advance as investors expresses some concern of a strong yen. Hong Kong's Hang Seng index added 30.99 points, or 0.24%, to close at 13,036.32.