Stocks Claw Higher
But worries about earnings season keep a lid on buying
updated 51 minutes ago
NEW YORK - Wall Street moved cautiously higher Wednesday, with insurance and homebuilding stocks leading the market’s gains on a dose of positive news for those industries.
The gain were held in check, though, by worries over weak first-quarter earnings reports.
Concerns over upcoming quarterly results and company forecasts for the remainder of the year have rattled the market this week, saddling the Dow Jones industrials with a nearly 3 percent loss over the past two days.
The losses on Monday and Tuesday followed four straight weeks of massive gains that gave the Dow its best performance since 1933. While few analysts are ready to call the end of the rally, trading is likely to remain volatile as investors look to earnings reports for signs of where the economy is headed.
“I think the market is going to be very tentative throughout this earnings season,” said Randy Frederick, director of trading at Charles Schwab. “There is going to be sporadic bright spots here and there.”
Some glimmers of hope came from the homebuilding and insurance industries on Wednesday. A $1.3 billion deal between Pulte Homes Inc. and rival Centex Corp. to create the nation’s largest homebuilder was greeted as a sign that the stricken industry may be getting back on its feet.
Another positive was word that the government may soon extend a lifeline to certain troubled life insurers.
In midday trading, the Dow Jones industrials rose 39.26, or 0.5 percent, to 7,828.82. The Standard & Poor’s 500 index rose 6.76, or 0.8 percent, to 822.31, and the Nasdaq composite index rose 22.15, or 1.4 percent, to 1,583.76.
Market participants said the recent dip has created an attractive entry point for investors who don't want to miss out on a continued upswing.
"We're still in the midst of that rally," said Dave Rovelli, managing director of trading at brokerage Canaccord Adams. "These guys that run mutual funds, they can't miss the rally. If the S&P starts to go positive and they are behind, they are going to have to start buying just to keep up with the return. That's why this rally might have legs."
Insurers jumped on news that the government's Troubled Asset Relief Program may soon be extended to the life insurance industry, according to a report in the Wall Street Journal Wednesday. The announcement could come within the next several days, the Journal reported, citing people familiar with the matter.
Such a move would help stabilize the troubled industry, which has been hit hard by big investment losses this past year amid the ongoing turmoil in the market.
Meanwhile, technology shares got a boost after Juniper Networks Inc. said its first-quarter earnings should meet forecasts even as sales will likely fall short of expectations.
Also Wednesday, members of the Securities and Exchange Commission voted on new rules restricting short-selling. Many have blamed the practice for the market's crash this past fall.
Later in the day, the Federal Reserve will release the minutes from its March meeting that should give further insight into the central bank's numerous efforts to boost lending and its view on the economy.
Investors had become more upbeat in recent weeks on increasingly better economic data. This, combined with the U.S. government's efforts to prop up the banking industry and boost lending, helped drive the market to its best four-week performance since 1933.
Before Monday, the Dow had risen more than 20 percent from a 12-year low in early March. But the average has lost 228 points this week as investors log profits, fearing that worse-than-expected earnings reports could upset the market's rally.
Late Tuesday, aluminum maker Alcoa Inc. — the first of the 30 companies that make up the Dow to report quarterly results — said it lost $497 million in the first quarter as prices for the lightweight metal fell. The loss was larger than the average expectation of Wall Street analysts.
As earnings reports pour in over the coming weeks, investors will be particularly focused on companies' forecasts for the remainder of the year, which should give some indication of where the economy is headed.
On Wednesday, a handful of companies, including Ryder System Inc. and Sharp Corp., lowered their forecasts.
Bond prices jumped. The yield on the benchmark 10-year Treasury note, which moves opposite its price, fell to 2.84 percent from 2.90 percent late Tuesday.