RTTNews - Stocks have ceded their early gains and are moving mostly lower in early afternoon trading on Tuesday, as traders are doing some profit taking following the recent run-up. The Nasdaq and the S&P 500 have moved firmly into the red, although the Dow is lingering near the unchanged line.

Federal Reserve Ben Bernanke continues to testify before the House Financial Services Committee, saying that the U.S. economy is showing signs of stabilization and that the stimulus authorities have pumped into the global economy probably avoided a collapse of the financial system last year.

Bernanke also said that the Fed is prepared to remove its stimulus when the time is appropriate in order to avoid a spike in inflation. However, the Fed chairman reiterated that the economy is still in a fragile state, with unemployment high and consumer spending shaky.

The early upward move in equities came following a string of promising earnings, with five Dow components reporting their quarterly results. Caterpillar (CAT), Coca-Cola (KO), DuPont (DD), Merck (MRK) and United Technologies (UTX) all reported earnings that beat Wall Street estimates.

While Schering-Plough (SGP) and Lockheed Martin (LMT) also reported better than expected results, State Street (STT) disappointed.

The reaction to the better-than-expected figures was somewhat subdued, as firms generally beat or met earnings by initiating aggressive cost cutting measures rather than through revenue growth.

The major averages are currently all in negative territory, although the Dow is posting a relatively modest loss. The Dow is currently down 10.05 at 8,838.10, while the Nasdaq is down 11.97 at 1,897.32 and the S&P 500 is down 5.37 at 945.76.

Sector News

Most of the major sector indices have moved lower over the course of the trading day, with traders cashing in on the strong gains that were posted in recent sessions.

Airline and banking stocks are posting steep losses, as reflected by the 4.5 percent pullback being shown by the NYSE Arca Airline Index and the 3.6 percent retreat by the Kbw Bank Index. Notably, the airline index is pulling back off of the five-month closing high it set on Monday.

Additionally, computer hardware, semiconductor, trucking and gold stocks are also sliding by considerable margins on the day. The NYSE Arca Computer Hardware Index and the Philadelphia Semiconductor Index are down by 2.6 percent and 2.2 percent, respectively.

The computer hardware index is pulling back off of its best closing level in over a year, while the semiconductor index is moving off its highest closing level in over nine months.

Nonetheless, some strength remains visible among biotechnology, chemical, and pharmaceutical stocks. After posting a standout gain on Monday, the NYSE Arca Biotechnology Index is currently up 2.4 percent, rising to its best intraday level in ten months.

Stocks In The News

Shares of Packaging Corp. of America (PKG) are on the rise in early afternoon trading after the firm reported a sharp rise in second-quarter earnings, beating Wall Street estimates. The company also expects to earn $0.24 per share in the coming quarter based on a boost in sales volume, higher than analyst forecasts of $0.12 cents per share. The stock is up by 7.3 percent, reaching its best intraday price in roughly nine months.

McClatchy Co. (MNI) is also climbing after the firm reported second-quarter net income of $42.21 million or $0.50 per share, compared to $19.67 million or $0.24 per share in the same quarter of last year. Shares of the publishing firm are up by 42.6 percent, reaching their best intraday price in seven weeks.

Meanwhile, Lexmark International (LXK) has come under pressure after the company reported second quarter revenues that fell short of expectations. The stock is sliding by 20.3 percent, falling to its worst level in just under two months.

In Focus: Earnings Reports

As mentioned above, several Dow components reported their quarterly results today, with Caterpillar reporting a second-quarter profit of $0.60 per share, down from $1.74 per share in the year-ago quarter. Wall Street analysts expected the company to earn $0.22 per share.

Coca-Cola revealed adjusted second-quarter net income of $0.92 per share, down from $1.01 per share in the same quarter last year. Nonetheless, the firm beat analyst forecasts of $0.89 per share.

Chemical giant DuPont reported adjusted second-quarter net income of $0.61 per share, surpassing expectations of $0.53 per share for the quarter. Meanwhile, net sales for the quarter declined compared to the same period last year and fell short of estimates.

Merck posted adjusted second quarter net income of $0.83 per share, compared to $0.86 per share in the previous year quarter. The results exceeded analysts' consensus estimate of $0.77 per share.

Additionally, United Technologies disclosed second quarter net income of $1.05 per share, compared to $1.32 per share in the year ago quarter. Results for the recent quarter include $0.22 per share in restructuring costs and $0.06 per share from a one-time gain.

After the closing bell today, traders will look to quarterly results from Apple (AAPL), Yahoo! (YHOO) and Advanced Micro Devices (AMD).

Other Markets

In overseas trading, stock markets across the Asia-Pacific region turned in a mixed performance on Tuesday. While Japan's benchmark Nikkei 225 Index posted a 2.7 percent gain, China's Shanghai Composite Index fell 1.6 percent.

Meanwhile, the major European markets all closed the day showing strong gains, with the German DAX Index and the French CAC 40 Index finishing up by 1.3 percent and 1 percent, respectively, while the U.K.'s FTSE 100 Index saw a 0.9 percent gain.

In the bond markets, treasuries are soaring as Fed chief Bernanke has stressed that interest rates will remain low for an extended period. Subsequently, the yield on the benchmark ten-year note is trading at 3.463, posting a loss of 12.2 basis points.

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