NEW YORK – Investors traded stocks cautiously Tuesday as lackluster corporate results renewed questions about how quickly the economy can recover from the recession.
Wall Street fluctuated in a narrow range as traders looked for signals about the market’s direction. Some back-and-forth was expected following heavy selling Monday and a flurry of corporate comments about the economy.
Bank of New York Mellon Corp., Caterpillar Inc., Coca-Cola Co. and drugmaker Merck & Co. posted results or issued forecasts that fell short of what the market expected. Wall Street is uneasy because analysts had set expectations low after a bruising January in which fourth-quarter results short-circuited a stock market rally.
In late morning trading, the Dow Jones industrial average rose 10.11, or 0.1 percent, to 7,851.84.
Broader stock indicators rose. The Standard & Poor’s 500 index rose 3.41, or 0.4 percent, to 835.80, and the Nasdaq composite index rose 14.41, or 0.9 percent, to 1,622.62.
Bank of New York Mellon’s first-quarter earnings fell a steeper-than-expected 57 percent. The company said it was slashing its dividend to boost capital. The stock fell $3.39, or 12.1 percent, to $24.64.
Construction equipment maker Caterpillar posted better-than-expected earnings but reduced its forecast. The stock fell 94 cents, or 3.1 percent, to $29.54.
Coca-Cola fell $1.29, or 2.9 percent, to $43.04, after its first-quarter earnings fell 10 percent because of restructuring charges and write-downs. The beverage maker’s earnings were in line with Wall Street’s expectations but sales fell short.
Merck reported a 57 percent drop in first-quarter earnings because of a slide in both sales of its drugs and income from its partnership on cholesterol medicines. Merck fell $1.82, or 7.2 percent, to $23.40.
The reports and forecasts follow a drop of more than 3 percent in Wall Street’s major stock indicators Monday. Analysts said some pullback was in order after stocks surged more than 20 percent from 12-year lows in March. But Bank of America Corp.’s earnings report on Monday touched off renewed fears about rising levels of bad debt. Traders grew worried that economy might not be stabilizing as hoped.
Subodh Kumar, an independent investment strategist in Toronto, said the cautious comments from companies in a range of industries are underscoring the difficulties facing much of the economy.
“This is still a very tough business environment. The market was essentially ahead of itself,” he said, referring to the extent of the recent advance.
Doug Roberts, chief investment strategist, ChannelCapitalResearch.com, said the string of earnings reports are clouding the market.
“People are kind of going day to day,” he said. “Everybody is hesitant to take too big of a position given the uncertainty of the environment.”
Wall Street looked for insight into the troubles at financial companies as Treasury Secretary Timothy Geithner defended the government’s $700 billion financial rescue program in testimony before a Congressional oversight panel.
His appearance came as the International Monetary Fund predicted U.S. financial institutions could lose $2.7 trillion from the global credit crisis. And a special inspector general assigned to the rescue plan concluded in a
Geithner said in prepared remarks that the new plan “strikes the right balance” by letting taxpayers share the risk with the private sector while at the same time letting private industry use competition to set market prices for the assets.
Geithner wrote in a letter to Elizabeth Warren, head of the Congressional Oversight Panel, that $109.6 billion in resources remain in the government’s $700 billion financial rescue fund. Officials expect the fund will be boosted over the next year by about $25 billion as some institutions pay back money they have received. That would leave $134.6 billion.
But investors’ worries about banks aren’t likely to ease soon, some analysts contend.
“Nothing has been remedied in the banking sector,” said Dave Rovelli, managing director of trading at brokerage Canaccord Adams. “A lot of these banks, they’re basically making money only because they’re getting money from the government for free.”
In other corporate news, DuPont said its first-quarter profit dropped on falling demand. The chemical company also cut its full-year forecast and said it will increase its efforts to cut fixed costs. DuPont rose $1.01, or 3.8 percent, to $27.75.
Bond prices were mixed. The yield on the benchmark 10-year Treasury note, which moves opposite its price, fell to 2.82 percent from 2.84 percent late Monday. The yield on the three-month T-bill, considered one of the safest investments, rose to 0.14 percent from 0.12 percent Monday.
Light, sweet crude fell 38 cents to $45.50 a barrel on the New York Mercantile Exchange.
The dollar slipped against other major currencies while gold prices fell.
Overseas, Japan’s Nikkei stock average fell 2.4 percent. In afternoon trading, Britain’s FTSE 100 fell 1.4 percent, Germany’s DAX index fell 1.1 percent, and France’s CAC-40 fell 1.4 percent.