NEW YORK (CNN/Money) -
Stocks rose Tuesday for the second straight session as economic and earnings news soothed fears about a second-half slowdown.
The session's advance was limited, however, by a new spike in oil prices.
After the close, Applied Materials (AMAT: up $0.43 to $16.07, Research, Estimates) reported earnings of 26 cents a share, a penny more than Wall Street had expected, on sales that doubled and a jump in orders.
The company also said that it would earn between 24 cents and 26 cents per share in the current quarter. Analysts surveyed by First Call expect earnings of 27 cents.
Shares had risen in after-hours trade following the earnings, but gave back gains after the warning, trading near the regular session closing price.
Nasdaq and S&P futures pointed to a flat open Wednesday, when fair value is taken into account.
The Dow Jones industrial average (up 18.28 to 9,972.83, Charts) and the Standard & Poor's 500 (up 2.37 to 1,081.71, Charts) index each rose about 0.2 percent Tuesday.
The Nasdaq composite (up 12.41 to 1,795.25, Charts) added 0.7 percent.
Stocks gained at the open following a mild inflation report, strong housing data, and momentum from Monday's big rally.
Home Depot's earnings and a drop in oil prices added to the early move. But blue chips had trouble holding on to gains as the day wore on and oil prices turned higher.
"There's a little follow-through from yesterday," said Barry Ritholtz, market strategist at Maxim Group. "I would be happier if we had significant volume."
Market breadth was positive and volume was light. On the New York Stock Exchange, winners beat losers by around three to two as 1.26 billion shares changed hands. On the Nasdaq, advancers beat decliners by more than four to three as 1.37 billion shares traded.
Looking forward, Ritholtz said the market is most likely near the bottom of a trading range, and is likely to drift sideways through the Republican National Convention, before possibly putting in a new low. After that, he says it's likely to see a rally in the fourth quarter.
The Republican National Convention gets underway Aug. 30 in New York and runs through Sept. 2.
What moved?
In corporate news, home improvement retailer Home Depot (HD: up $1.12 to $35.10, Research, Estimates) reported earnings of 71 cents a share, up from 56 cents a year earlier and 7 cents more than what analysts surveyed by First Call were expecting.
The Dow component also boosted its fiscal 2004 earnings forecast. The stock rallied, adding 3.3 percent.
Staples (SPLS: up $0.99 to $28.87, Research, Estimates) reported earnings of 24 cents per share, 2 cents more than expected and up from 18 cents a year earlier. Revenue and gross margins also gained in the quarter.
The office products retailer also boosted its fiscal-year forecast and said it is planning to enter the fast-growing Chinese market. Shares gained 3.5 percent.
Motorola (MOT: up $0.66 to $15.08, Research, Estimates) jumped 5 percent after the mobile phone maker said it expects to see strong sales growth through the rest of 2004, due to a crop of new handsets with specialized features.
Halliburton (HAL: down $0.49 to $27.30, Research, Estimates) stock fell following a report that until a long-running billing dispute is resolved, the U.S. military will withhold payments amounting to about $60 million a month. Shares managed to close off the lows for the session.
Oil roils
Stocks have been particularly sensitive to the fluctuations in the energy market of late.
Light crude oil for September delivery settled at $46.75 a barrel, a gain of 70 cents, rising on concerns over exports from troubled Russian oil company Yukos and sabotage fears in Iraq.
Yukos lost an appeal Tuesday to pay its $3.4 billion tax bill with shares it owns in oil company Sibneft, Reuters reported, citing Russian news agencies. Reports that Iraq may scale back its pipeline capacity on sabotage threats also bolstered crude prices.
"Oil is out there, and any time it rallies, it's a concern to stocks," said John Hughes, market analyst at Shields & Co.
Hughes said daily fluctuations in oil prices have become less important to stocks but remain influential, particularly when stock trading volume is light.
Released before the open, the Consumer Price Index (CPI) for July boosted the markets early in the day by registering a surprise drop, implying that inflation has remained tepid, a comfort to investors who have been warily eyeing rising energy prices.
A separate report showed that housing starts and building permits jumped in July, surpassing estimates and rebounding from a surprisingly weak June.
Treasury prices gained. The 10-year note rose 18/32 of a point, lowering its yield to 4.19 percent from 4.26 percent late Monday. Treasury prices and yields move in opposite directions.
In currency trading, the dollar rose against the yen and euro.
COMEX gold rose $1.50 to settle at $406.70 an ounce.
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