Major Averages Close Mixed After A Lackluster Trading Session - U.S. Commentary
Though late strength allowed the Dow Industrial Average to post a modest advance, U.S. stocks generally turned in a lackluster session on Tuesday. Negative economic data put pressure on stocks early in the day, and only a mid-afternoon rally allowed the major averages to finish with a mixed performance.
After relief about Hurricane Rita's relative tame devastation led to a modest advance on Monday, stocks ticked higher at the start of Tuesday's trading. This upward momentum quickly disappeared, however, after the mid-morning release of disappointing data for both consumer confidence and new home sales.
The broader indices spent most of the middle of the day in negative territory, but they recovered during the mid-afternoon, helped by a speech from Alan Greenspan that contained no cautionary statements. Stocks moderated during the final hour of trading and finished with a mixed performance, with the Dow ending moderately higher while the Nasdaq closed slightly below the flat line. Dow +12.58, Nasdaq -5.04, S&P 500 +0.03. NYSE Adv/Dec 14341876, Nasdaq Adv/Dec 1368/1640.
HMO stocks jumped sharply higher on reports that WellPoint (WLP) was in talks to acquire Wellchoice (WC). In the mid-morning, the companies confirmed that they have reached a $6.5 billion deal to merge, an announcement that sent Wellchoice further higher. The HMO sector added to its gains a bit during the afternoon and finished with an advance of 1.1%. Wellchoice gained 6.6% to reach a new 52-week high.
The airline and broker/dealer sectors overcame morning losses to finish with modest gains. Software and defense stocks also showed some strength.
Notwithstanding gains in the software group, technology was among the biggest laggards on the session. Though it finished off its intraday lows, the semiconductor sector fell 1.2% on the day. Computer hardware and disk drive stocks were also weak.
In the mid-afternoon, Federal Reserve Chairman Alan Greenspan made a speech to the National Association for Business Economics that mostly dealt with the benefits of the increasing flexibility of the U.S. economy. While the speech was historical in focus, equity traders may have been relieved that the Fed chairman didn't say anything antagonizing to the markets (on Monday, Greenspan caused some concern with statements about the mortgage markets).
One comment that may have given some support to the market dealt with the economy's ability to deal with high energy prices. Specifically, Greenspan said, "the flexibility of our market-driven economy has allowed us, thus far, to weather reasonably well the steep rise in spot and futures prices for oil and natural gas that we have experienced over the past two years."
After reversing an early decline on Monday to finish the session notably higher, oil prices hovered near the flat line for most of Tuesday's trading, before selling off a bit late in the day. Light, sweet crude fell about $1 on the day to close just above $65 per barrel. Oil prices will be in focus on Wednesday, as the government will release its weekly petroleum statistics during the mid-morning.
The Conference Board revealed that its consumer confidence index dropped sharply in September to 86.6, its lowest level since October of 2003. The reading is down from August's level of 105.5 and below the projections of most economists. The Conference Board's expectations index also fell sharply, dropping to 71.7 for September from 93.3 in August.
Separately, the Commerce Department reported that new home sales declined 9.9% in August to a seasonally adjusted annual rate of 1.237 million units. July's rate was revised down to 1.373 million units from the 1.410 million unit rate that was originally reported. Economists had expected a rate of 1.363 million units.
After a choppy session, treasury yields finished slightly higher on the day, despite the negative economic news. Still, the 10-year yield, which gained less than a basis point to close at 4.301%, finished above the 4.3% mark for the first time since the first half of August.
Before the opening bell Wednesday, the government is scheduled to release data on durable goods orders for the month. Economists expect the measure of orders for items meant to last more than 3 years to rise by 1% in August, reversing part of July's 4.9% decline.
European Stocks Fall - European Commentary
The major European markets finished lower on Tuesday. Stocks in the UK held in positive territory through the first half of the trading day, but slipped below the flat line during the afternoon. The French and German markets bounced around in negative territory throughout the session.
The UK's FTSE index closed at 5,447.30, down 5.80 points on the day. France's CAC 40 dropped 20.12 points to 4,546.80 and the German DAX slipped 32.28 points to 4,965.88.
Major Asian Markets Finish Mixed - Asian Commentary
The major Asian markets finished mixed on Tuesday. Stocks in Japan and Hong Kong lost ground as traders took profits after Monday's sharp run up. India and Indonesia saw their main equity indices record modest gains.
Japan's Nikkei 225 index dropped 82.59 points to close at 13,310.04. Hong Kong's Hang Seng index fell 84.43 points to 15,189.88.
