RTTNews - Following a choppy start to the session, stocks are continuing to show a lack of conviction in early afternoon trading on Tuesday. The major averages have bounced back and forth across the unchanged line, as trader reaction to the latest batch of economic and earnings reports has been muted by low volume.

On the economic front, a report released by the Commerce Department revealed that retail sales increased by a little more than expected in the month of June, although the sales growth was due in large part to higher gasoline prices. Excluding increases in gas station and motor vehicle and parts sales, retail sales actually fell for the month.

In a separate report, the U.S. Labor Department revealed that producer prices, a key measure of wholesale inflation, rose by a significant margin in June after seeing only a mild increase in the previous month.

Aside from the economic figures, traders are also digesting a slew of earnings, with Goldman Sachs (GS) firmly beating analyst estimates and Johnson & Johnson (JNJ) edging out forecasts.

The major averages are currently posting modest gains, although they are well off their highs for the session. The Dow is currently up 3.93 at 8,335.61, the Nasdaq is up 1.44 at 1,794.65 and the S&P 500 is up 1.68 at 902.73.

Sector News

Resource stocks are extending their gains in early afternoon trading, continuing to benefit from an increase in commodities prices. Oil is currently up $0.33 at $60.02 per barrel, bouncing off of an eight-week closing low, while gold is rising by $3.30 to $925.80 per ounce.

Strength has also continued among railroad stocks, with the Dow Jones Railroads Index rising by 3.6 percent on the day. CSX Corp. (CSX) is boosting the sector, showing a gain of 6.2 percent after reporting stronger than expected earnings for the second quarter.

Further, shares of Genesee & Wyoming (GWR) are also turning in a strong performance in the railroad sector, rising 2.2 percent, despite reporting a 1.8 percent decrease in June traffic.

While semiconductor and defense stocks are also moving to the upside, weakness has remained among health insurance stocks, with the Morgan Stanley Healthcare Payor Index sliding by 2.2 percent on the day. Nonetheless, the index remains stuck in a three week-trading range.

The index is being dragged down by shares of Humana (HUM) and Health Net (HNT), which are down by 6 percent and 14.3 percent, respectively. The losses come after both firms lost contracts to provide healthcare services for members of the U.S. military.

Computer hardware and banking stocks are also retreating, partly offsetting the strong gains posted in the previous session. The NYSE Arca Computer Hardware Index is down by 1.3 percent, with shares of Dell (DELL) pulling the index lower.

Dell is posting a loss of 7 percent, after warning that it will report lower gross margins for the second quarter. The day's decline has taken the stock to its worst intraday level in a month.

Stocks In The News

Novellus (NVLS) is advancing in early afternoon trading after CEO Richard Hill revealed that he expects gross margins to improve to 40 percent in the coming quarter after second quarter earnings fell short of expectations. The stock is up by 2.4 percent after rising to its best intraday price in well over nine months earlier in the session.

A.O. Smith Corp. (AOS) is also climbing after its Board of Directors approved a 2.6 percent increase in the company's quarterly cash dividend to $0.195 per share. Shares of the water heater specialist are up by 2.6 percent, advancing to their best intraday level in nearly two weeks.

On the other hand, Take Two Interactive (TTWO) is plummeting after reducing its fiscal 2009 guidance based on the delay of the launch of BioShock 2 from the fourth quarter of fiscal 2009 to fiscal 2010. The stock is down by 9.8 percent, falling to its worst intraday level in nearly one month's time.

In Focus: Economic Data, Earnings News

As mentioned above, a report from the Commerce Department showed that retail sales rose 0.6 percent in June following an unrevised 0.5 percent increase in May. Economists had been expecting retail sales to increase by a somewhat more modest 0.4 percent.

However, excluding gas station and motor vehicle and parts sales, the headline retail sales figure showed a decrease 0.2 percent for the month.

Meanwhile, the U.S. Labor Department revealed that producer prices rose 1.8 percent in June. This followed a 0.2 percent increase in the previous month. Core producer prices, which exclude food and energy prices, climbed 0.5 percent.

The equity markets are also reacting to earnings from Goldman Sachs, which reported second-quarter earnings of $2.72 billion or $4.93 per share, compared to $2.05 billion or $4.58 per share in the same quarter of last year.

Excluding the impact of the TARP, earnings were $3.14 billion or $5.71 per common share for the second quarter of 2009. Wall Street expected the company to report earnings of $3.54 per share for the quarter.

Johnson & Johnson reported adjusted second quarter earnings of $4.26 billion, down from $4.42 billion in the year ago quarter. On a per share basis, earnings were $1.15, compared to $1.18 per share in the same period last year. Analysts forecast the firm to earn $1.11 per share.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region ended Tuesday's session notably higher, with Japan's benchmark Nikkei 225 Index and Hong Kong's Hang Seng Index climbing by 2.3 percent and 3.7 percent, respectively.

The major European markets also moved to the upside, with the German DAX Index and the French CAC 40 Index finishing up by 1.3 percent and 1 percent, respectively. The U.K.'s FTSE 100 Index also rose, posting a gain of 0.9 percent on the day.

In the bond markets, treasuries continue to see a notable sell-off. Subsequently, the yield on the benchmark ten-year note is trading at 3.428 percent, a gain of 8.2 basis points on the day.

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