Stocks surge on earnings
Market resumes upward climb on upbeat profit reports from Apple, American Express and others; Wal-Mart, Coach fail to impress investors; oil prices dip.
NEW YORK (CNNMoney.com) -- Apple's upbeat earnings helped fire up the tech sector Tuesday afternoon, as investors continued to move back into stocks after last week's mass exodus.
Treasury prices rose, lowering the corresponding yields. Oil and gold prices dropped.
After the close, Amazon.com (Charts, Fortune 500) reported higher quarterly sales and earnings that topped estimates and boosted its current-quarter revenue forecast. But investors took a "sell the news" approach and sent the stock 9 percent lower in extended-hours trading, nearly erasing the 10 percent advance Amazon shares had posted during the regular session.
Also due Wednesday: the September existing home sales report and the weekly oil inventories report.
Upbeat earnings from Apple and American Express and a drop in oil prices were among the factors lifting stocks throughout the session.
Cautious comments from Wal-Mart Stores about its sales outlook briefly sent the Dow into negative territory in the late morning and continued to limit the blue-chip average's advance near the close.
Additionally, lower-than-expected forecasts from Texas Instruments and Coach weighed on those stocks, reminding Wall Street of how much profit growth is expected to slow this quarter.
Nonetheless, after last week's selloff, investors were willing to scoop up some of the beaten-down shares.
Stocks tumbled last week on a mix of credit market fears and record oil prices, with the Dow losing 367 points in a single day.
Stocks may be due for more of a pullback, considering the extent of the recent run, the slower earnings, record oil prices and threats to economic expansion, said Greg Church, president at Church Capital.
But stocks can probably drift higher this week as investors show caution ahead of the Federal Reserve policy meeting next week.
"We had some good tech earnings today, but some forecasts weren't as good," Church said. "We have a Fed meeting coming up and I think people are looking for a cut. The bulls are hanging their hats on that."
However, after cutting a key short-term interest rate by a half-percentage point last month, the Fed could pass on cutting rates next week. Should that happen, stocks could start that bigger pullback off the recent highs, he said.
But not all the corporate news was so positive.
Wal-Mart Stores (Charts, Fortune 500) said it expects growth to slow this year and for the next two years. The world's leading retailer also said it was cutting its capital spending for the year. Wal-Mart was holding its annual meeting for analysts and investors Tuesday and Wednesday.
Texas Instruments (Charts, Fortune 500) warned that fourth-quarter revenue won't meet forecasts, sending shares over 8 percent lower in active New York Stock Exchange trade. The chipmaker also reported stronger third-quarter earnings.
Level 3 Communications (Charts, Fortune 500) reported a wider third-quarter loss versus a year earlier that nonetheless was narrower than analysts were expecting on an earnings-per-share basis. The seller of broadband and dial-up Internet services also cut its fiscal 2007 and 2008 outlook. Level 3 shares slumped 24 percent and topped the Nasdaq's most-actives list.
With 31 percent of the S&P 500 having reported results, earnings are currently on track to have fallen 0.1 percent from the same 2006 period, according to the latest figures from Thomson Financial. That's a blended figure, combining reported and expected earnings. Even if the rest of the earnings period brings lots of upside surprises, earnings growth is still on track to be the slowest in at least 5 years.
Market breadth was positive. On the New York Stock Exchange, winners beat losers by more than 2 to 1 on volume of 1.31 billion shares. On the Nasdaq, advancers beat decliners 3 to 2 on volume of 2.39 billion shares.
U.S. light crude oil for December delivery fell for a second session in a row, closing at $85.27 a barrel. Crude hit an all-time high of $90.07 last week in electronic trading.
COMEX gold for December delivery rose $3.10 to settle at $763.10 an ounce.
Treasury prices rose, lowering the yield on the benchmark 10-year note to 4.40 percent from 4.41 percent, little changed from late Monday. Bond prices and yields move in opposite directions.
In currency trading, the dollar fell versus the euro and gained against the yen.