Stocks weakened on Tuesday amid uncertainty about the outlook for the economy and corporate earnings, says Standard & Poor's MarketScope. Oil prices were lower.
The Dow Jones industrial average fell 91.34 points, or 0.89%, to 10,151.13. The broader Standard & Poor's 500 index was down 10.36 points, or 0.89%, to 1,151.74. The Nasdaq composite index lost 23.34 points, or 1.2%, to 1,927.44.
In the energy markets Tuesday, June West Texas Intermediate crude oil settled down 37 cents at $54.20 per barrel. The Street is looking for a 400,000 barrel crude stock build when EIA statistics are released on Wednesday, which added to the already bearish tone for oil, reports Action Economics.
The major economic report on Wednesday is durable goods orders for March, which is expected to rise 0.3%. Shipments are forecast to increase 1.0%, and inventories are expected to jump 0.8%. There will be a lot interest in this report, as last month's reports helped set off the talk about an emerging "soft patch" in the economy, according to Action Economics. In addition, the report has important implications for finalizing first-quarter gross domestick product (GDP) estimates heading into Thursday, notes Action Economics.
Companies on Wednesday's earnings calendar include Boeing (BA), Colgate-Palmolive (CL), ConocoPhillips (COC), LSI Logic (LSI), Procter & Gamble (PG), Pulte Homes (PHM), Siebel Systems (SEBL), Starbucks (SBUK), and Verizon (VZ).
In economic news Tuesday, the April consumer confidence index slumped to 97.7 in April from March's 103.0 (revised from 102.4). This was the third straight decline, and though expected, was a little weaker than forecast.
However, a strong reading on the housing sector helped boost home-building stocks on Tuesday. March new home sales surged 12.2% to a record 1.431 million annualized pace, from 1.275 million in February (revised from 1.226 million). Though risk was for a stronger number, this pace is well above expectations, notes Action Economics. Sales were stronger in three of the four regions covered. The supply of new homes for sale dove to 3.6 months, from 4.3 in February.
The biggest gainer in the Dow average was IBM (IBM), which rose after the tech giant announced it will buy back $5 billion worth of its stock. IBM also raised its quarterly dividend to 20 cents a share from 18 cents a share, payable June 10 to holders of record as of May 10.
Boeing (BA) shares fell, despite news that Air India said it will order 50 new passenger jets from the company valued at $6 billion. This follows Monday's news that Boeing won a contract to build planes for Air Canada.
Among other companies in the news, American International Group (AIG) has uncovered at least $1 billion more in accounting problems, according to the New York Times. AIG shares fell.
Earnings news also grabbed attention. Dow component DuPont (DD) announced strong numbers, but warned of higher raw material costs in 2005.
Lexmark International (LXK) shares dropped after the company reported disappointing first-quarter earnings. The maker of printers said first-quarter market conditions were particularly challenging due to aggressive pricing and soft consumer market demand.
After the market close, Amazon.com (AMZN) reported disappointing results and guidance, sending the shares lower in after-hours trading.
The chip sector gained ground, amid disappointing numbers from Taiwan Semiconductor (TSM) and Germany's Infineon Technologies (IFX), while Altera (ALTR) posted firm results, reports Standard & Poor's MarketScope. TSM shares rose after the company said it sees the digestion of inventory near its end, and 38%-40% second-quarter gross profit margin.
Coach (COH) shares rose after the company reported third-quarter earnings per share of 23 cents, vs. 15 cents a year ago, on a 33% revenue rise. The luxury goods maker sees over $1.7 billion in fiscal year 2005 sales and EPS of at least 97 cents. For fiscal year 2006, it sees at least $2 billion in sales and at least $1.18 for EPS, compared with the current consensus estimate of $1.13.
Other companies on the earnings calendar Tuesday included Hilton Hotels (HLT), American Express (AXP), and Schlumberger (SLB).
Treasury yields jumped following news that the housing market remained on the boil in March, with a record gain in new home sales, which offset the expected decline in consumer confidence, says Action Economics. The benchmark 10-year note yield climbed to 4.27%.
European stock markets finished lower on Tuesday. London's Financial Times-Stock Exchange 100 index was down 19.4 points, or 0.4%, to 4,845.5. BP was higher after the company said first-quarter profit rose 29% because of higher energy prices and production. Imperial Tobacco was lower as the company's six months' earnings were less than analysts expected. And Whitbead fell as full-year profits missed targets.
Germany's DAX index lost 13.2 points, or 0.31%, to 4,233.76 after Germany's six leading economic institutes cut their forecast for growth this year in half as oil prices at $50 a barrel drained consumers' spending power and unemployment rose to a post-World War II record. Infineon was lower after the company reported a fiscal second-quarter loss on lower sales and costs to reorganize; the company sees "no major improvement" in demand for the current quarter. Merck KgaA was down on lower than expected first-quarter earnings. Puma was lower after the company said its first-quarter backlog for European orders slid 5.5% percent because of sluggish economic growth and dwindling demand.
In Paris, the CAC 40 index was essentially flat at 3,993.04, even though oil prices headed lower. Cap Gemini, STMicroelectronics, and Alcatel were lower after Germany's Infineon reported lower earnings.
Asian markets finished mixed on Tuesday. In Japan, the Nikkei 225 index fell 37.94 points, or 0.34%, to 11,035.83. Investors remained largely sidelined amid earnings reporting season. Nissan Motor rose 1.74% after the automaker reported record earnings on Monday. On the economic front, Japan's March CPI fell 0.3% year-over-year, lower than market's consensus forecast of a 0.4% decline. The March unemployment rate fell to 4.5%, vs. the market's consensus forecast of 4.6%.
In Hong Kong, the Hang Seng index gained 109.35 points, or 0.8%, to 13,859.58.