Stocks fluctuate on anxiety over earnings reports
NEW YORK -- A mix of corporate news sent Wall Street zigzagging Monday. Stocks rose on optimism about Pfizer's acquisition of rival drugmaker Wyeth but fell on earnings reports that pointed to further weakness in the economy. Late in the day, the major indexes were holding on to moderate gains.
Pfizer's $68 billion acquisition of Wyeth offered investors reassurance that dealmaking could still take place in a recession. And a report from the National Association of Realtors that sales of existing homes rose rather than fell in December stirred hopes that lower prices and falling interest rates are helping eat away at a glut of homes with "for sale" signs.
But mixed news from big companies weighed on the market. Downbeat comments from Caterpillar Inc. about the health of its business curbed the advance in the Dow industrials. Caterpillar shares dropped more than 8 percent after the maker of heavy equipment said plunging commodity prices left the company "whipsawed" in the fourth quarter. Caterpillar said it would offer buyouts to 25,000 employees in the U.S. and cut executive pay.
Home Depot Inc. also announced big job cuts. The company said it would slash 7,000 jobs and close its smaller Expo chain as it struggles with the weak housing market.
"There's a lot of things for investors to digest in what is a very uncertain market environment, and I think that is why you see some hesitation," said Todd Salamone, senior vice president of research, Schaeffer's Investment Research.
In midafternoon trading, the Dow rose 65.87, or 0.82 percent, to 8,143.43, after briefly moving into negative territory.
The Standard & Poor's 500 index rose 6.57, or 0.79 percent, to 838.52, and the Nasdaq composite index rose 11.97, or 0.81 percent, to 1,489.26.
The Russell 2000 index of smaller companies rose 5.79, or 1.30 percent, to 450.15.
Advancing issues outnumbered decliners by about 2 to 1 on the New York Stock Exchange, where volume came to 1.18 billion shares.
Earnings data this week and company's comments about the coming year will play a big part in shaping investor sentiment.
"Depending on how these earnings reports come out, that is going to set the tone going forward," said Jon Biele, head of capital markets at Cowen & Co.
More results are due after the market closes Monday from some of the biggest companies in a range of industries, including American Express Co. and Texas Instruments Inc.
Investors are also awaiting more details on President Barack Obama's proposed stimulus package, which is working its way through Congress.
Senate committees are scheduled to take up the massive plan Tuesday and the full House is expected to vote on its version of the $825 billion package Wednesday. The plan could include big tax cuts and a massive public works program.
"Right now (the market) is in a holding pattern," said Doug Roberts, chief investment strategist at Channel Capital Research. "They know things aren't going to get any better soon, but want to see what this package is going to look like."
Stocks are coming off a wild week of big ups and downs as companies' financial results weighed on the market. All the major indexes finished last week with losses of more than 2 percent.
Analysts expect volatility in the market to persist through the remainder of earnings season.
"It's almost like a teeter-totter right now," said Alan Lancz, money manager at Alan B. Lancz & Associates. "Earnings season is always treacherous in this kind of global economic environment with all the uncertainty."
Of the companies in the Standard & Poor's 500 index that have reported results in recent weeks, more than half have fallen short of analysts' already reduced estimates. The poor showing has left investors nervous that the economy is in worse shape than feared.
Caterpillar was one of the latest disappointments. Shares dropped $2.99, or 8.4 percent, to $32.67.
A bit of bright earnings news came from McDonald's Corp., which posted better-than-expected profits but said revenue fell from a year earlier. Same-store sales, or sales at stores open at least a year, rose worldwide and in the U.S., where the company's low-prices have been a draw for consumers worried about the economy. Shares gained 18 cents to $58.20.
Bank stocks advanced after Britain's Barclays PLC said it expects to turn in a profit for 2008 and that it doesn't need a financial bailout to stay in business despite hefty write-downs. JPMorgan Chase & Co. rose 44 cents to $24.72, while Bank of America Corp. added 11 cents to $6.35.
Wyeth fell 34 cents to $43.40, and Pfizer fell $1.93, or 11 percent, to $15.52. Pfizer said it will cut its dividend as part of the deal, though Wall Street often sells companies that announce acquisitions.
A private research group also delivered good news Monday. The Conference Board said its monthly forecast of economic activity rose unexpectedly in December, largely because the rush of federal bailouts increased the money supply.
Bond prices fell Monday as stocks rose. The yield on the benchmark 10-year Treasury note, which moves opposite its price, rose to 2.65 percent from 2.62 percent late Friday. The yield on the three-month T-bill, considered one of the safest investments, rose to 0.10 percent from 0.09 percent late Friday.
The dollar fell against other major currencies, while gold prices rose.
Light, sweet crude slipped 66 cents to $45.81 on the New York Mercantile Exchange.
Overseas, Japan's Nikkei stock average fell 0.08 percent. Britain's FTSE 100 rose 3.86 percent, Germany's DAX index rose 3.54 percent, and France's CAC-40 jumped 3.73 percent.