Stocks are mixed as investors digest earnings | The Mesh Report

Stocks are mixed as investors digest earnings

the Mesh Report Staff July 20, 2010 0

Stocks turned mixed Tuesday as investors digested disappointing earnings reports from IBM and Johnson & Johnson.

The Dow Jones industrial average was down 12 points after falling 140 in early trading. Other indexes rose modestly, and advancing stocks were ahead of losers on the New York Stock Exchange. Volume was extremely light, which helped to exaggerate price moves.

The revenue misses were the latest sign of weakness in companies’ second-quarter earnings reports. Johnson & Johnson’s revenue missed expectations following drug recalls, and IBM Corp. said it signed fewer services contracts. Texas Instruments Inc.’s revenue came in line with forecasts but investors were hoping for better.

Leading investment bank Goldman Sachs Group Inc. also reported lower revenue as its trading business was curtailed by the financial markets’ difficult spring.

But the earnings news wasn’t all bad, and that likely contributed to stocks starting to drift higher during afternoon trading.

PepsiCo Inc.’s revenues jumped 40 percent thanks to a deal to buy out its two biggest bottlers, which was showing signs of paying off for the company’s U.S. drinks business. Excluding currency fluctuations, Pepsi’s earnings per share came in ahead of analysts’ expectations, and its shares jumped $1.84, or 3 percent, to $63.89.

Andrew Frankel, co-president of institutional broker Stuart Frankel & Co., didn’t see a big trend under way in the market.

“We’re right in the middle of the summer doldrums. And without a lot of buyers and sellers, stocks can move up and down quite easily. I wouldn’t read too much into (market moves)”

Still, the revenue figures at some companies were making many traders pessimistic about the economic recovery.

“Investors are looking to see if this yearlong recovery is leading to revenue growth. So when a big company like IBM backs away from market expectations, then suddenly investors start retrenching,” said Alan Gayle, senior investment strategist for RidgeWorth Investments based in Richmond, Va.

A downbeat report on the housing sector didn’t help the market’s mood. The Commerce Department said home construction fell last month to the lowest level since October. The drop was mitigated by a 2.1 percent rise in building permit applications, an indicator of future activity.

The Dow fell 10.52, or 0.1 percent, to 10,143.84. The broader Standard & Poor’s 500 index rose 2.34, or 0.2 percent, to 1,073.59 and the Nasdaq composite index fell 3.55, or 0.2 percent, to 2,194.68.

Advancing stocks were ahead of losers by nearly 4 to 3 on the NYSE, where volume came to 541 million shares.

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