After showing some weakness earlier in the trading day, stocks are moving mostly higher in mid-afternoon trading on Tuesday, as investors respond well to remarks from Treasury Secretary Geithner and shrug off some disappointing corporate news.
In an interview with RTT News, Paul Mendelsohn, chief investment strategist at Windham Financial Services attributed today's earlier losses to profit taking and said that while stocks could give back some ground over the next couple of days he believes there is more upside.
Longer term, however, Mendelsohn predicted that the market is going to trade in a trading range with very volatile swings... for at least the next three to five years. We do not see any potential to go into a new bull market, he added.
The initial weakness came as Dow component Merck (MRK) reported first quarter earnings that fell short of analyst estimates and lowered its full year revenue guidance. While the Dow has rebounded since then, shares of Merck remain down 6.2 percent.
Meanwhile, shares of Caterpillar (CAT) have rebounded after seeing some earlier weakness, with the construction equipment maker currently up 0.7 percent. While Caterpillar reported much better than expected adjusted first quarter earnings, it also slashed its full-year guidance.
DuPont (DD) is also seeing notable strength even though the chemical giant reported first quarter earnings that fell year-over-year and lowered its full-year guidance. The company's downwardly revised earnings guidance brought it in line with analyst estimates.
Dow components Coca-Cola (KO) and IBM (IBM) are among the slew of other companies that have recently reported their quarterly results as the earnings season picks up steam.
In testimony before the Congressional Oversight Panel, Geithner assured lawmakers that there is enough money left in the government's $700 billion financial rescue program to stabilize the financial system. Geithner said there is at least $134.4 billion in funds left.
The Treasury Secretary also said that the vast majority of U.S. banks have enough capital and hinted that the credit markets may be thawing following their deep freeze.
Indicators on interbank lending, corporate issuance and credit spreads generally suggest improvements in confidence in the stability of the system and some thawing in credit markets, Geithner said.
The major averages are currently holding onto notable gains, although they have moved well off their best levels of the day. The Dow is currently up 56.79 at 7,898.52, the Nasdaq is up 14.35 at 1,622.56 and the S&P 500 is up 8.07 at 840.46.
A majority of the Dow components have moved higher over the course of the trading day, contributing to the upward move by the blue chip index.
Citigroup (C) and Bank of America (BAC) are posting particularly strong gains after falling sharply in the previous session. Shares of Citigroup are currently up 7.8 percent, while shares of Bank of America are up 6.6 percent.
Shares of United Technologies (UTX) have also shown a strong upward move, with the industrial conglomerate currently up 4 percent after reaching its best intraday level in over two months. The gain by United Technologies comes after the company reported better than expected first quarter earnings.
Strong gains by General Motors (GM), JP Morgan (JPM), and General Electric (GE) have also helped to lift the Dow well above the unchanged line.
As mentioned above, however, Merck remains firmly in negative, helping to limit the upside for the Dow. Coca-Cola and Boeing (BA) are also posting notable losses, falling 2.3 percent and 1.5 percent, respectively.
As with the Dow, the leaders in the broader markets are primarily coming out of the banking sector, driving the S&P Banks Index up 5.5 percent. Within the sector, Comerica (CMA) is up 10.3 percent, challenging a recent four-month closing high.
Airline, healthcare, and networking stocks are also showing notable strength, with the Amex Airline Index up 7.4 percent, while the Morgan Stanley Healthcare Provider Index and the Amex Networking Index are posting gains of 5.6 percent and 4 percent, respectively.
Meanwhile, gold stocks continue to posted notable losses, joined by semiconductor and health insurance stocks. The Amex Gold Bugs Index is down 3.1 percent, while the Philadelphia Semiconductor Index and the Morgan Stanley Healthcare Payor Index and down 2.3 percent and 1.2 percent, respectively.
In overseas trading, stock markets across the Asia-Pacific region closed mostly lower on Tuesday following the sell-off seen on Wall Street overnight. Japan's benchmark Nikkei 225 Index showed a notable decline, closing down 2.4 percent.
Meanwhile, the major European markets ultimately closed mixed after seeing earlier weakness. While the French CAC 40 and the German DAX Index finished the day up 0.2 percent and 0.3 percent, respectively, the U.K.'s FTSE 100 Index closed down 0.1 percent.
In the bond market, treasuries are holding below the unchanged line after seeing earlier strength. Subsequently, the yield on the benchmark 10-year note is currently up 4.8 basis points at 2.891 percent.
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