Stocks seesaw on mixed earnings

By Julianne Pepitone, staff reporter


NEW YORK(CNNMoney.com) -- Stocks ended mixed after a choppy session Wednesday, as differing profit reports from Apple and Yahoo weighed on the tech sector and investors remained wary following strong quarterly reports from Morgan Stanley and Wells Fargo.

The Dow Jones industrial average (INDU) added 8 points, or less than 0.1%, to end at 11,124.92. The S&P 500 index (SPX) fell 1 point, or 0.1%, to settle at 1,205.93, and the Nasdaq composite (COMP) rose 4 points, or 0.2%, to close at 2,504.61.

"As we get beyond earnings, attention is going to turn right back to the housing and job markets," said Dave Hinnenkamp, chief executive of KDV Wealth Management. "The downturn has left a really big scar, and investors who got burned will be cautious for some time."

Stocks finished Tuesday's session in positive territory, thanks to better-than-expected earnings from Goldman Sachs and several consumer companies.

"Investors were holding their breath for this earnings season, and it looks like it's going to be decent," Hinnenkamp said. "This makes people comfortable saying we're in a recovery process, but it's going to be a slow one."

Tech earnings: Late Tuesday, iPod and Mac maker Apple (AAPL, Fortune 500) posted a record quarter that blew past Wall Street's estimates. Apple shares ended more than 6.1% higher.

Yahoo (YHOO, Fortune 500) also delivered earnings that beat expectations, but its sales came in below estimates. Shares closed down 4.9%.

"The tech sector leads out of the recession," Hinnenkamp said. "After that we'll be looking for the industrial and material sectors to rise -- and once we move forward, attention will turn to the energy sector."

Financial earnings: Earlier Wednesday, Morgan Stanley (MS, Fortune 500) said it swung to a $1.8 billion profit in the first quarter Wednesday before the bell, as strong trading revenue boosted the Wall Street firm's latest results. Shares of Morgan ended 4.2% higher.

Wells Fargo (WFC, Fortune 500) reported a $2.5 billion profit before the bell, beating Wall Street expectations. The company said that credit conditions have "turned the corner" from the weakness of the financial crisis. Still, Wells shares fell almost 2% by the end of trading.

Overall, the finance sector ended 10.8% higher Wednesday.

"We're not unreasonably priced at these levels, considering earnings," Hinnenkamp said, "but it's not a deep-value market, either."

Other corporate results: In addition to banks, investors digested quarterly results from several Dow components:

-- AT&T (T, Fortune 500) beat estimates on a boost from strong sales of Apple's iPhone;

-- Boeing (BA, Fortune 500)'s profit and revenue dropped amid fewer airplane deliveries;

-- McDonalds (MCD, Fortune 500)' earnings rose above predictions as sales rose across all its markets, especially Europe and Asia;

-- United Technologies (UTX, Fortune 500) also beat estimates.

Also, Chrysler announced that it earned its first operating profit since exiting bankruptcy on June 10, 2009. The profit follows nearly $4 billion of losses logged by the automaker during that time.

The results continued after the markets closed, with Starbucks (SBUX, Fortune 500) and other major names reporting results after the bell. The coffee chain handily beat profit and sales estimates, and the company lifted 2010 guidance. Shares were up 2% in after-hours trade.

In other company news, General Motors announced Wednesday morning that it had made a final payment of $5.8 billion late Tuesday to the U.S. and Canadian governments, paying off the last of its $6.7 billion in loans.

Outlook: "Psychological issues will continue to drive the markets," said KDV's Hinnenkamp.

He expects a slow but continued higher trend, with the S&P around 1,200 in the coming weeks, and the Dow around 11,250.

"The economy is improving, but slowly," Hinnenkamp said. "Thus recovery wont come as quickly hoped for, and a sustained bounceback can come only once housing and jobs kick in."

But even negative news outside of the real estate and employment sectors could put a damper on the uptick, Hinnenkamp added.

"Any piece of bad news, people worry there's an Armageddon," he said. "But there's always good and bad news out there -- it depends where you choose to focus."

World markets: European shares, including the FTSE 100 in Britain, France's CAC 40 and Germany's DAX, ended lower.

Asian markets ended the session mixed. Japan's Nikkei rallied 1.7% and the Shanghai Composite surged 1.8%. The Hang Seng in Hong Kong lost 0.5%.

Other markets: The dollar edged higher against the euro but remained weak versus the Japanese yen and the U.K. pound.

The price of oil fell 17 cents to settle at $83.68 a barrel. Wednesday marked the first day of the June contract.

COMEX gold for June delivery prices rose $9.60 to settle at $1,148.20 an ounce.

Treasury prices were higher, with the yield on the benchmark 10-year note at 3.78%. Bond prices and yields move in opposite directions. To top of page

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