July 27, 2010, 10:35 a.m. EDT
By Donna Kardos
NEW YORK (MarketWatch) — U.S. stocks flitted between small gains and losses Tuesday as disappointing reports on consumer confidence and regional manufacturing activity weighed against a rise in U.S. home prices and strong earnings.
Investors have been struggling in recent weeks to evaluate a market divided by encouraging earnings and discouraging economic data. Earlier in Tuesday’s session, data showing an increase in U.S. home prices for May served as a source of relief, but cold water was thrown on the market’s excitement over the report after a measure of consumer confidence fell and slightly missed expectations, while a reading of Richmond-area manufacturing also dropped.
“We’ve seen a slew of high-profile companies beat expectations. But the concern, which has been the ongoing concern for the past two months, is whether or not this economic recovery will continue,” said Adam Sarhan, chief executive at Sarhan Capital.
“Consumer confidence is an extremely important gauge to determine whether consumer spending will increase, stay the same or decrease,” Sarhan said. “When you have consumer confidence fall and fall short of expectations, it bodes poorly for the ongoing economic recovery.”
The Richmond manufacturing data is “also an indication that the ongoing global recovery might be in jeopardy or might slow down,” Sarhan added.
The Dow Jones Industrial Average edged up 16 points, or 0.2%, to 10542, in recent trading. The measure was led by DuPont, which jumped 4%. The chemical giant reported a second-quarter profit that almost tripled, while revenue increased more than expected on improved volume and higher selling prices.
The Dow’s financial components were also strong following encouraging earnings from European banks. Bank of America climbed 1.3%, and J.P. Morgan Chase added 1.6%.
However, keeping the gains in check, American Express dropped 1.4%, Caterpillar fell 1.1% and Intel dropped 0.9%.
The Nasdaq Composite declined less than a point to 2296. The S&P 500 eked out a gain of 0.1% to 1116, up 0.1% for the year. The financial sector led to the upside, as sentiment toward the sector improved following better-than-expected earnings from UBS and Deutsche Bank.
UBS posted a far-better-than-expected second-quarter profit as its investment bank held up better than rivals and further stanched withdrawals at its private-banking arm. Deutsche Bank, meanwhile, posted a 6.2% increase in second-quarter net profit, aided by a sharp drop in its provision for bad loans, gains from its acquisition of ABN Amro’s commercial-banking assets in the Netherlands and lower valuations of Deutsche Bank’s own debt. UBS jumped 7.8%, and Deutsche Bank advanced 3.2%.
Also serving as a source of encouraging, the S&P Case-Shiller home-price indexes released Tuesday showed home prices were boosted in May by seasonal factors and the residual impact of the now-discontinued first-time home buyers’ tax credit. The Case-Shiller the 20-city index rose 1.3% compared with April. Adjusted for seasonal factors, it increased 0.5%. From a year earlier, the 20-city reading climbed 4.6%.
Still, cautioned David M. Blitzer, chairman of S&P’s index committee: “While May’s report on its own looks somewhat positive, a broader look at home-price levels over the past year” doesn’t show that the housing market “is in any form of sustained recovery.”
The euro fell to $1.977 after hitting an 11-week high against the dollar earlier Tuesday. The U.S. Dollar Index, reflecting the U.S. currency against a basket of six others, edged up 0.1%. Treasurys slipped, lifting the yield on the 10-year note up to 3.03%. Gold futures fell, while crude-oil futures slipped below $79 a barrel.
Among stocks in focus, BP’s U.S. shares fell 2.2%. The company posted a $17.15 billion loss for the second quarter as it made provision for $32.2 billion dollars in costs related to the Gulf of Mexico oil spill. Meanwhile, the oil giant launched a radical shakeup, including plans to sell about $30 billion in assets, replace Chief Executive Tony Hayward with Bob Dudley, and alter the way it does business.