RTTNews - Stocks continue to hold on to minimal gains in mid-afternoon trading on Tuesday, after bouncing in and out of positive territory throughout the day. The major averages are all in marginally positive territory, despite some discouraging data from the housing sector.
The day's trading has also been marred by low volume, as stocks have struggled to sustain consistent direction on the day.
Earlier this afternoon, President Barack Obama announced his goal for new fuel standards, proposing regulations that would require an average fuel economy of 35.5 miles per gallon for automobiles beginning in the year 2016.
The goal is to set one national standard, Obama said at the White House.
The new standards, covering model years ranging from 2012 to 2016, will require an average fuel economy standard of 35.5 mpg by the year 2016. The plan is projected to save 1.8 billion barrels of oil over the life of the program, with fuel economy gain averaging more than 5 percent per year. Further, the program will lead to a reduction of approximately 900 million metric tons in greenhouse gas emissions, the White House said.
The announcement has sparked some investor speculation as to the ability of car manufacturers to adjust to the new government standards.
Earlier, traders were presented with data from the U.S. Commerce Department showing a decline in housing starts in April to an annual rate of 458,000 units, compared to March's revised rate of 525,000 units.
Economists had forecasted the figure to rise to a pace of 540,000 units from the rate of 510,000 units originally reported for March. The report showed that building permits were also down, slipping by 3.3 percent to an annual rate of 494,000 units.
On the earnings front, Home Depot (HD) reported first quarter results that edged out Wall Street estimates. The company reported earnings for the quarter at $587 million or $0.35 per share compared to an earnings forecast of $0.29 per share.
Medtronic (MDT), the world's largest medical technology firm, reported fourth quarter earnings at $0.22 per share, including one-time charges. However, leaving out these items, the profit met expectations with a figure of $0.82 per share. Shares of Medtronic declined on the news, currently down by 7.1 percent on the day.
In other news, three major banks intend to apply to repay funds borrowed under the government's TARP program, adding to trader speculation that the financial crisis may be easing.
Specifically, financial giants Goldman Sachs (GS), JPMorgan Chase (JPM) and Morgan Stanley (MS) look to repay the bail-out funds received under the TARP program in October. The three firms have received a total of $45 billion in government aid. The government is expected to announce the results of the firms' filings no later than June 8th.
The major averages are posting mild gains, lingering near their best levels in recent trading. The Dow is currently up 27.24 at 8,531.32, the Nasdaq is up 16.76 at 1749.12, and the S&P 500 is up 5.56 at 915.37.
The Dow components are essentially split between gains and losses as the blue chip index is showing little conviction on the day.
Contributing to the mild upside seen in the Dow are shares of Hewlett Packard, climbing by 2.8 percent, ahead of second quarter results due to be released after the closing bell on Wall Street. With the advance, the stock is continuing to move away from a monthly low set late last week. Shares are also moving toward a two and a half month high set earlier this month.
Analysts are estimating quarterly earnings of $0.86 per share on revenues of $27.42 billion for the computer giant. The firm posted earnings of $0.87 per share in the year ago quarter, while bringing in revenues of $28.3 billion. Recently, the Palo Alto, California-based company reaffirmed its second quarter earnings outlook, ranging between $0.84 and $0.86 per share, excluding a one-time charge.
Other Dow components on the rise include General Motors (GM) and Citigroup (C), up by 6.7 and 4.6 percent, respectively. Shares of Alcoa (AA) are also seeing notable upside as the firm is speculated to benefit from new government automobile emission regulations, likely to bring in contracts to manufacture a new line of lightweight steel for cars.
The Dow is being limited by shares of Home Depot (HD) which reported better-than-expected earnings but reduced its earnings per share and revenue outlook for the fiscal year 2009. Notable weakness has also emerged in shares of American Express (AXP) and JP Morgan Chase (JPM).
A number of major sectors are holding on to their gains in mid-afternoon trading, helping to sustain the major averages in positive territory on the session.
Gold stocks are seeing notable strength on the day, with the Amex gold BUGS Index rising by 4.6 percent on the day. With the climb, the index has reached its best level of the year, and its highest quote since August. The move has come following a gain of more than $6 in gold futures on the day.
Healthcare provider stocks continue to enjoy considerable gains, as reflected by the 5.3 percent gain currently being shown by the Morgan Stanley Healthcare Provider Index. Significant strength has also continued among steel stocks, with the Amex Steel Index climbing by 5.2 percent on the day.
On the other hand, banking and tobacco stocks are showing considerable weakness, pulling down the Amex Tobacco Sector Index and Dow Jones Bank Sector Index by 1.3 and 1.5 percent, respectively.
In overseas trading, stock markets across the Asia-Pacific region finished higher on Tuesday. Japan's benchmark Nikkei 225 Index rose by 2.7 percent, while Hong Kong's Hang Seng Index climbed 3.0 percent.
Meanwhile, the major European markets turned in largely modest gains on the day. The French CAC 40 Index closed up 0.9 percent, while the German DAX Index also rose, finishing up by 2.2 percent. Meanwhile, the U.K.'s FTSE 100 Index also saw some strength on the day, closing up by 0.8 percent.
In the bond markets, treasuries moved off of their worst levels of the day, but closed in firmly negative territory. Subsequently, the yield on the benchmark ten-year note finished up 3.2 basis points at 3.243 percent.
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