[BRIEFING.COM] What was initially shaping up to be a dismal day for stocks, as earnings concerns underpinned a negative tone throughout most of the session, actually finished on an upbeat note.
Last night, Alcoa (AA 31.85 -1.56) officially kicked off earnings season, posting record earnings and revenues. However, with sales falling short of expectations, coupled with the recognition that Q3 is a seasonally weak period and CEO commentary quashing speculation about AA being a takeover candidate, weighed heavily on the Dow component (-4.7%).
Lucent Technologies (LU 2.19 -0.15) saying that Q3 sales and earnings will miss expectations also weighed on sentiment. In particular, Lucent's warning exacerbated ongoing worries about the impact of higher interest rates on growth stocks in a Technology sector already reeling from recent warnings out of EMC, AMD and MMM. Microsoft's (MSFT 23.10 -0.40) Bill Gates citing merely an 80% chance of Vista being ready in January, and potentially millions of dollars in fines stemming from an EU investigation of the software gaint, also contributed to the continued lack of enthusiasm seen in tech - that is until a market starving for anything positive to suggest that a bottom has finally been formed in this year's worst performing sector found a catalyst to restore buying efforts.
While a sense that continued losses in the influential semiconductor group were overdone had already prompted some bargain-hunting interest in chip stocks, KLA-Tencor (KLAC 42.56 +3.23) saying it will exceed the top end of its fiscal Q4 bookings guidance of 9-11% helped the market stage a comeback around 2.00 ET.
With ongoing concerns ranging from options backdating to excess inventories currently sidelined, short sellers were sent running for cover as the tech-heavy Nasdaq, which was off as much as 1.0% and down 5.0% year-to-date intraday, outpaced its blue chip counterparts and nearly erased Monday's 0.6% decline.
Energy, though, turned in the day's best performance (+1.8%) as investors flocked to own the likes of Refiners, Drillers and Explorers that are expected to again combine for the largest contribution to operating earnings growth for the SnP 500. Crude oil prices closed up 0.6% at $74 per barrel after Iran's president reportedly said they are determined to complete uranium enrichment. Consumer Staples also closed higher, in large part after Pepsi Bottling Group (PBG 33.89 +1.54) topped forecasts and raised its FY06 outlook.
Another sector benefiting from its defensive characteristics was Health Care, which pared some of its year-to-date losses amid renewed interest in Managed Health following the group's dismal 14.3% decline in Q2. Even Financials eked out a small gain, eventually benefiting from a decline in borrowing costs. Treasuries closed higher across the yield curve after catching a flight-to-quality bid following reports of bombs going off on several commuter trains in Mumbai, India.
DOW Price at posting:
0.0¢ Sentiment: None Disclosure: Not Held
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