After seeing initial weakness, stocks have shown a lack of direction over the course of morning trading on Tuesday. The major averages have bounced back and forth across the unchanged line, having difficulty sustaining any significant moves.
The choppy trading comes as traders digest the latest batch of earnings news, including the release of results from several Dow components.
Merck (MRK) is among the blue chip companies that have released their quarterly results, with the drug giant showing a notable decline after reporting earnings that fell short of analyst estimates and lowering its full year revenue guidance.
Excluding restructuring charges and expenses related to its pending acquisition of Schering-Plough (SGP), Merck reported earnings of $0.74 per share compared to analyst estimates of $0.77 per share. The company also said its sales fell by a bigger than expected 8 percent.
Looking forward, the company said it is reducing its guidance range for full-year 2009 revenue to $23.2 to $23.7 billion. The company said it expects sales and earnings in the second half of the year to be stronger than in the first half.
Shares of Caterpillar (CAT) are also moving lower after the construction equipment maker reported its first quarterly net loss since 1992. While the company reported much better than expected adjusted earnings, it also slashed its full-year guidance.
Meanwhile, DuPont (DD) is seeing some strength even though the chemical giant reported first quarter earnings that fell year-over-year and lower its full-year guidance. The company's downwardly revised earnings guidance brought it in line with analyst estimates.
In other news, Treasury Secretary Timothy Geithner is facing lawmakers Tuesday as he delivers an update on the Troubled Asset Relief Program, the $700 billion financial rescue plan. Of that staggering sum, just under $110 billion is left, while $25 billion is expected to be repaid.
Lawmakers will likely fire questions at Geithner, especially in the wake of a report from the special inspector general for TARP that warns that the program creates potential unfairness to the taxpayer.
The major averages are currently turning in a mixed performance, with the tech-heavy Nasdaq posting a modest gain. While the Nasdaq is up 2.00 at 1,610.21, the Dow is down 45.48 at 7,796.25 and the S&P 500 is down 4.26 at 828.13.
With the mixed performance by the broader markets, the major sector indices are also moving on opposite sides of the unchanged line. On the upside, some of the best performances are coming out of the healthcare sector, driving the Morgan Stanley Healthcare Provider Index up 5.4 percent.
Within the sector, Tenet Healthcare Corp. (THC) is helping to lead the way higher, with the hospital operator currently up 33.8 percent after saying that it is expects strong quarterly results and raising its full-year guidance. With the advance, the stock is at its highest level in over five months.
Airline, networking, and housing stocks are also seeing notable gains on the day, with the Amex Airline Index up 3.5 percent, while the Amex Networking Index and the Philadelphia Housing Index are posting gains of 3 percent and 1.4 percent, respectively.
At the other end of the spectrum, banking stocks are leading the losing stocks for another day. The Kbw Bank Index is down 4.7 percent on the day, adding to the steep loss it posted in the previous session.
Additionally, health insurance, real estate, and pharmaceutical stocks are suffering considerable losses. The Morgan Stanley Healthcare Payor Index is down 1.5 percent, while the Morgan Stanley Real Estate Index and the Amex Pharmaceutical Index are both down 1.2 percent.
Stocks Driven By Analyst Comments
AU Optronics (AUO) is posting a significant 8.6 percent gain on the day after being upgraded to Outperform from Neutral at Credit Suisse. With the advance, the stock has risen to its highest level in over six months.
Additionally, Lincoln National (LNC) is posting a gain of 2.5 percent after being upgraded to Buy from Underperform at Merrill Lynch/Bank of America. The upgrade came as analysts feel the company should qualify for and accept TARP funding, which will reduce downside risk.
Meanwhile, Apollo Group (APOL) is suffering a loss of 7.4 percent after the stock was downgraded to Neutral from Outperform at Credit Suisse. Analysts said the downgrade came amid fears that the U.S. Department of Education was more likely to institute legal or regulatory changes that could hit the for-profit education sector.
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.
The major European markets are also showing considerable weakness. The U.K.'s FTSE 100 Index is down 1.8 percent, while the French CAC 40 and the German DAX Index are both down 1.7 percent.
In the bond market, treasuries are showing notable strength on the day, extending yesterday's gains and driving the yield on the benchmark 10-year note down 5.3 basis points to 2.79 percent.
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