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Stocks turned slightly higher Tuesday as investors digested disappointing earnings from IBM and Johnson & Johnson and awaited reports from two big tech companies after the close. The Dow Jones industrial average was up 26 points after falling 140 in early trading. Other indexes rose modestly, and advancing stocks were ahead of losers on the New York Stock Exchange. Volume was extremely light, which helped to exaggerate price moves.
Investors began the day by selling in response to companies’ revenue figures that fell short of expectations. Stocks then started drifting higher in afternoon trading, but analysts said they saw no catalyst for the turnaround.
“It’s fickle, a summer trading day. There’s a lack of demand and lack of supply. It lacks conviction,” said Stephen Carl, head of equity trading at The Williams Capital Group.
Trading was expected to be choppy while investors await earnings reports from hundreds of companies over the next few weeks. So far, investors are not happy with what they’re seeing.
Johnson & Johnson’s revenue missed expectations following drug recalls, and IBM Corp. said it signed fewer services contracts. Texas Instruments Inc.’s revenue came in line with forecasts but investors were hoping for better. Investors have been focusing on revenue rather than earnings because of the link between companies’ sales and the economy. If revenue is down because consumers aren’t spending, that’s a sign that the economy will remain weak for some time.
Leading investment bank Goldman Sachs Group Inc. also reported lower revenue as its trading business was curtailed by the financial markets’ difficult spring.
But the earnings news wasn’t all bad, and that likely contributed to stocks’ move higher.
PepsiCo Inc.’s revenues jumped 40 percent thanks to a deal to buy out its two biggest bottlers, which was showing signs of paying off for the company’s U.S. drinks business. Excluding currency fluctuations, Pepsi’s earnings per share came in ahead of analysts’ expectations.
After the close of trading, Yahoo Inc. and Apple Inc. were reporting their results.
The Dow rose 26.79, or 0.3 percent, to 10,181.22. The broader Standard & Poor’s 500 index rose 5.89, or 0.6 percent, to 1,077.14 and the Nasdaq composite index rose 3.72, or 0.2 percent, to 2,201.95.
Advancing stocks were ahead of losers by 2 to 1 on the NYSE, where volume came to an extremely 641 million shares.
A downbeat report on the housing sector didn’t help the market’s mood. The Commerce Department said home construction fell last month to the lowest level since October. The drop was mitigated by a 2.1 percent rise in building permit applications, an indicator of future activity.
Johnson & Johnson’s revenues came in flat, and below what analysts were expecting. The company said several recalls of popular nonprescription medicines kept its top line in check. J&J’s shares, a component of the Dow, fell $1.27 or 2.2 percent to $58.30.
For some companies, even matching expectations for revenues isn’t enough. Late Monday Texas Instruments reported revenues that came in line with estimates, but investors were disappointed that the company didn’t report results as robust as come of its competitors. TI’s shares slumped $1.13, or 4.4 percent, to $24.42.
IBM fell $4.05, or 3 percent, to $125.75.
Goldman Sachs’ results are being closely watched since investors are concerned about how much banks will be restricted from trading by new financial regulation reform. The bank’s net income after paying preferred stock dividends fell 83 percent to $453 million on lower trading revenue and a charge to settle civil fraud charges brought by the government.
Goldman rose $3, or 2 percent, to $148.68. Pepsi rose $2.36, or 3.8 percent, to $64.41
Bond prices rose as investors opted for safer investments. The yield on the benchmark 10-year Treasury note, which moves opposite its price, fell to 2.94 percent from 2.96 percent late Monday.
Overseas, Britain’s FTSE 100 fell 0.2 percent, Germany’s DAX index fell 0.8 percent, and France’s CAC-40 fell 0.7 percent. Japan’s Nikkei stock average fell 1.2 percent.
(Copyright 2010 by The Associated Press. All Rights Reserved.)