Wednesday, Jul 18, 2012
By Jonathan Cheng
U.S. stocks opened a touch higher ahead of Federal Reserve Chairman Ben Bernanke's second day of Capitol Hill testimony, though a mix of middling earnings and rising government borrowing costs in Spain gave investors little reason to push too hard in either direction.
The Dow Jones Industrial Average edged up 19 points, or 0.1%, to 12824 after opening lower, while the Standard & Poor's 500-stock index tacked on four points, or 0.3%, to 1368. The Nasdaq Composite added 21 points, or 0.7%, to 2931.
Pulling on the downside were financial and materials stocks. Bank of America Corp. led the Dow components lower, falling 1.1% after the Charlotte-based lender reported second-quarter earnings that exceeded analyst forecasts but disappointed investors. Analysts pointed out that the earnings beat was "low-quality," citing lower tax rates and credit costs in driving up profits.
The declines were more than offset by strength in technology and industrial stocks. Intel shares rose 2.4% to lead the Dow components after the blue-chip semiconductor maker topped earnings expectations, though it also lowered its full-year revenue-growth outlook, citing a more challenging macroeconomic environment.
Investors also eyed ongoing concerns in Europe, where Spain's 10-year government borrowing rate pushed back toward the 7% level that investors consider unsustainable. That move came after news that bank deposits declined by a record amount in May from a year earlier, while bad loans increased for a 14th consecutive month. Spain's IBEX-35 index reversed earlier losses to edge up 0.2%, following the gains in U.S. stocks.
In the U.S., home construction rose 6.9% last month from May to an annual rate of 760,000, better than expectations for a 5.2% monthly gain and the highest level in nearly four years. But building permits for June fell by 3.7% to an annualized level of 755,000--lower than Wall Street expectations.
Separately, Fed Chairman Bernanke will testify to Congress for a second day, this time to the U.S. House Financial Services Committee, but his testimony is expected to mostly repeat what he said to the Senate Banking Committee on Tuesday.
In general, European markets moved slightly higher. The FTSE 100 index added 0.5% after news that U.K. unemployment declined. For the three months ending in May, the U.K. unemployment rate fell to 8.1% from 8.3% in the previous three-month period. The broader Stoxx Europe 600 rose 0.7%.
Asian markets finished mostly lower, with Japan's Nikkei Stock Average down 0.3% and Australia's ASX 200 lower by 0.4%. China's Shanghai Composite bucked the trend, however, rising 0.4%.
Crude-oil futures added 0.3% to above $89 a barrel, while gold futures declined 0.8% to below $1580 an ounce. The U.S. dollar rose against the euro but slipped against the yen.
In corporate news, Facebook bounced back 2.1% after a six-day slide that shaved 13% off the social-networking company's share price.
Yahoo added 0.5% after the Internet company reported second-quarter earnings that beat estimates, while revenue fell a touch shy.
International Business Machines edged up 0.6% ahead of its earnings report, due after the closing bell Wednesday.
Honeywell International gained 5.9%. The company reported second-quarter earnings that were above estimates, and raised the lower end of the range of its full-year earnings outlook.
Vivus surged 11% after the company said the U.S. Food and Drug Administration approved the company's weight-loss drug Qsymia.
VMware climbed 11% after the virtualization-software company announced preliminary revenue and adjusted operating margins that were above the ranges it had forecasted earlier. Separately, the company said Pat Gelsinger, currently the president and chief operating officer at EMC, was appointed chief executive, effective Sept. 1.
EMC rose 9.8% after backing its full-year earnings and revenue outlook while reporting preliminary second-quarter earnings that were slightly below estimates and revenue that was marginally above. The company also said VMware's current CEO, Paul Maritz, will join as chief strategist, effective Sept. 1.
Rovi tumbled 40% after the digital entertainment company provided a preliminary second-quarter earnings and revenue outlook that was well below analyst projections. It also lowered its forecasts for the full year.
Write to Jonathan Cheng at Jonathan.Cheng@wsj.com
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July 18, 2012 10:19 ET (14:19 GMT)