NEW YORK (CNN/Money) -
U.S. stocks closed mixed Thursday, with the Nasdaq and S&P 500 carving out new multimonth highs while the Dow edged lower due to weakness in Caterpillar and IBM after the release of their quarterly earnings.
The Nasdaq composite (up 11.04 to 1950.14, Charts) gained about 0.6 percent, the Standard & Poor's 500 (up 3.31 to 1050.07, Charts) index gained 0.3 percent, and the Dow Jones industrial average (down 11.33 to 9791.72, Charts) lost 0.1 percent.
How stocks perform Friday will likely depend on how investors respond to the many quarterly earnings reports released after the bell Thursday and early Friday.
"It's a mixed picture. There's no question that the news is a lot better, but it may be priced into the market," said Douglas Altabef, managing director at Matrix Asset Advisors.
After the close Thursday, Sun Microsystems (SUNW: down $0.16 to $3.63, Research, Estimates) reported a quarterly net loss of 9 cents per share, versus a year-ago net loss of 4 cents per share. Analysts surveyed by First Call were expecting a loss of 8 cents per share. Shares were little changed after hours.
Also after the close, eBay (EBAY: down $0.10 to $57.50, Research, Estimates) reported quarterly earnings of 18 cents per share, in line with estimates and up from 11 cents per share a year earlier. The company also issued a fourth-quarter forecast that is in line with estimates, but issued a fiscal 2004 earnings-per-share forecast that is slightly lower than analysts are currently expecting. The stock fell 5.5 percent in after-hours trade and dragged Amazon.com (AMZN: up $1.37 to $59.91, Research, Estimates) down with it.
Another company reporting after the close, Advanced Micro Devices (AMD: up $0.30 to $13.96, Research, Estimates), revealed a quarterly loss that was much narrower than analysts were expecting and was also an improvement from a year earlier. Shares rose almost 6 percent.
No market-moving earnings are due early Friday. However, pre-market economic readings on housing starts and building permits will likely interest investors, as will the University of Michigan's preliminary reading on consumer sentiment in October, due shortly after trading begins.
The sentiment index is forecast to have risen to 88.2 in October from 87.7 in September, according to a consensus of economists surveyed by Briefing.com.
Thursday's trade
Stocks spent Thursday morning adrift, with blue chips under pressure following Caterpillar and IBM's earnings and forecasts. However, selling pressure let up by midday, bolstered in part by the noon release of the Philadelphia Fed index, a gauge of regional manufacturing.
The Philly Fed index came in at 28, past the consensus of 16 and the previous reading of 14.6. The report followed Wednesday's strong reading on manufacturing in the New York area. The Philly Fed index -- combined with earlier reports showing that weekly jobless claims continued to drop and that factory output is edging up -- served to reinforce bets that the economic recovery is accelerating.
Stocks have rallied sharply for most of October on hopes that third-quarter earnings and forecasts will be strong, and while many have been, analysts said investors are exhausted and the rally may need to take a very short-term break.
As of Thursday's close, the Dow is up 5.6 percent, the Nasdaq is up 9.15 percent, and the S&P 500 is up 5.4 percent for the month.
"I'm very pleased with the market's performance in general, irrespective of today's hiccup," said Scotty George, chairman at Du Pasquier Asset Management. "We've had such a run-up that the natural response is a little profit-taking. But the bias remains to the upside longer-term."
The movers
After the close Wednesday, IBM (IBM: down $3.46 to $89.28, Research, Estimates) reported earnings of $1.02 per share, in line with estimates and up from 99 cents a year earlier, according to First Call estimates. However, sales missed expectations and the company warned that the technology sector hasn't really bounced back yet. The stock dropped 3.7 percent.
It was one of six Dow members that reported earnings between Wednesday night and Thursday morning.
Shares of fellow Dow member Caterpillar (CAT: down $4.02 to $74.33, Research, Estimates) tumbled 5.1 percent after the company reported earnings that rose from a year earlier but were shy of analysts expectations. The company also issued 2003 earnings-per-share guidance that was less than analysts are forecasting.
Share of United Technologies (UTX: up $0.70 to $84.40, Research, Estimates) rose 0.8 percent, after the company reported quarterly earnings that rose from a year earlier and topped expectations. Honeywell (HON: up $0.46 to $29.60, Research, Estimates) added 1.6 percent after reporting third-quarter earnings that met estimates and forecasting fourth-quarter earnings per share that will meet or beat current expectations.
In other earnings news, shares of Nokia (NOK: down $0.61 to $16.62, Research, Estimates) fell 3.5 percent. The cell phone maker reported earnings that beat estimates, but cautioned that weaker handset prices will pressure its profit in the fourth quarter.
Transmeta (TMTA: down $0.84 to $4.12, Research, Estimates) plunged 17.1 percent in active Nasdaq trade after the chipmaker warned that its fourth-quarter loss will be steeper than analysts are currently expecting, due to slower demand from its clients. The company also reported a third-quarter loss that was steeper than a year earlier but in line with expectations.
Countering the negativity, EMC (EMC: up $0.52 to $13.36, Research, Estimates) gained 4 percent and was among the NYSE's most actives after the data storage maker reported third-quarter earnings that rose from a year earlier and raised its fourth-quarter forecast.
The airline sector was strong, gaining after Northwest Airlines (NWAC: up $0.95 to $13.70, Research, Estimates) reported better-than-expected results. (For more of the day's earnings, click here.)
"If you want to look through the prism of the continued recovery story, you can find evidence in the earnings," Matrix's Altabef added. "But if you want to look through the prism of 'too far, too fast,' you can find evidence of that as well.
Market breadth was positive, with advancers beating decliners by nine to seven on both the New York Stock Exchange, where 1.36 billion shares traded, and on the Nasdaq, where 1.73 billion shares changed hands.
Treasury prices fell, pushing the 10-year note yield up to 4.46 percent from 4.39 percent late Wednesday. The dollar was stronger versus the yen and the euro.
NYMEX oil futures fell 20 cents to settle at $31.66 a barrel. COMEX gold rose 10 cents to settle at $373.20 an ounce.
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