Quarterly reports from International Business Machines, Texas Instruments and Goldman Sachs sent stocks tumbling early on concerns over slowing revenues, but a late rally erased the losses as investors looked expectantly to Federal Reserve guidance and upcoming earnings.
The Dow Jones Industrial Average wiped out a triple-digit decline on Tuesday to close up 75.53 points (0.74%) at 10,229.96. Investors said the market reversed its earlier declines amid speculation that Federal Reserve Chairman Ben Bernanke will assuage worries of a second recession in his two-day congressional testimony that starts on Wednesday. And optimism mounted for companies reporting earnings later in the week, including Apple, after Tuesday's closing bell, and financials including Morgan Stanley and Wells Fargo on Wednesday.
The Nasdaq Composite gained 24.26 points (1.10%) to 2,222.49. The Standard & Poor's 500-share index rose 12.23 (1.14%) to 1,083.48.
All three benchmark indexes traded in the red for much of the session. The Dow had wobbled close to the 10,000 level in early trading as investors worried that second-quarter reports showed slowing growth in top-line revenue.
IBM spent most of the session as the Dow's worst performer. Shares fell $3.24 (2.5%) to $126.55, after the company reported a 9% gain in second-quarter profit, but sales fell short of Wall Street expectations. Texas Instruments slid 78 cents (3.1%) to $24.77, after second-quarter profit tripled, but revenue came in a bit below guidance.
Investors initially retreated from Goldman Sachs Group after its second-quarter earnings slid 82%. The giant investment bank was socked by its settlement with the Securities and Exchange Commission and the UK's payroll tax. But adjusted results beat Wall Street forecasts, and shares closed up $3.23 (2.2%) to $148.91.
All but one of the S&P 500's sectors closed in the black. Health-care stocks lagged, weighed by a disappointing outlook from health-care products giant Johnson & Johnson. Shares dropped 99 cents (1.7%) to $58.58, after the company's second-quarter earnings rose 7.5% amid slightly higher sales, but Johnson & Johnson cut its 2010 earnings forecast, citing the ongoing recalls of various over-the-counter medicines.
Appliance maker Whirlpool shed $2.66 (2.9%) to $88.70, after its second-quarter earnings more than doubled, handily topping analysts' estimates, as higher volume boosted sales and margins. But analysts worried about slower quarter-over-quarter revenue growth in all segments and noted that operating profit gains are slowing.
Regional bank Zions Bancorp plunged $1.91 (8.9%) to $19.51, after its second-quarter loss widened more than expected on a prior-year gain as the bank reported its seventh straight quarter in the red.
Food-and-beverage company PepsiCo gained $2.68 (4.3%) to $64.73, even after its second-quarter profit fell 3% on declines in its Quaker food business and costs to integrate its newly acquired bottlers, but sales in the US got a leg up from the launch of a new line of Gatorade drinks.
Motorcycle maker Harley-Davidson jumped $3.22 (14%) to $26.83, after its second-quarter profit soared. The company's struggling financial-services operations swung to the black.
For Australian ADRs listed on the NYSE, BHP Billiton rose $3.11 (4.71%) to US$69.14, Rio Tinto Plc firmed $2.60 (5.59%) to US$49.14, ResMed dropped 5 cents (0.08%) to US$64.66, Telstra Corporation advanced 25 cents (1.76%) to US$14.46, Telecom Corporation of NZ increased 19 cents (2.83%) to US$6.90 and Westpac improved $3.50 (3.64%) to US$99.62.
In economic news, US builders held back their shovels as housing starts fell 5% in June to an adjusted rate of 549,000, the lowest level for starts since October. Economists were expecting starts to fall 3.2% to 574,000. Building permits rose, however, signalling a pickup down the road.
At 7:45 AM (AEST), the 10-year Treasury note yield was 2.95% and the five year yield was 1.69%.
European shares managed a small gain on Tuesday, with miners on the rise as autos and telecoms skidded on concern that a weak earnings season might signal another recession.
The Stoxx Europe 600 index rose 0.1% to close at 246.35. The index had given up 3.8% over the past four sessions as investors worried about the economic backdrop at the start of the second-quarter reporting season.
The resource sector added to recent gains, with miners on the rise. Rio Tinto rose 4.1%, while Vedanta Resources rose 4%.
Major European regional benchmarks ended the day in negative territory. The French CAC-40 index fell 0.5% to close at 3,468.02, the German DAX index dropped 0.7% to end at 5,967.49 and the UK FTSE 100 index finished 0.2% lower at 5,139.46.
Autos, tied to growth, led the decline in Europe on Tuesday, with Peugeot shares falling 2.5% and Fiat, which reports earnings on Wednesday, down 2.1%.
Daimler, which reported preliminary figures last week showing a quarterly profit and strong sales at its auto division, dropped 2.8%.
Telecom giant Vodafone Group updates investors on its quarterly trading performance on Friday. Shares fell 1.2% after a broker cut its stance on the firm to hold from buy.
Asian markets ended mostly higher on Tuesday as Chinese stocks marched ahead on continued expectations Beijing will avoid further tightening measures as the nation's economic growth moderates.
Japan's Nikkei Stock Average fell 1.1% as investors returned from a long weekend and reacted to the region's losses on Monday and Friday's sharp drop on Wall Street, although Dow Jones Industrial Average's gains overnight helped other markets in the region. China's Shanghai Composite advanced 2.2% and Hong Kong's Hang Seng Index rose 0.9%.
The New Zealand share market turned its back on three consecutive days of decline. The market closed 1.04% higher on Tuesday with the benchmark NZSX-50 up 30.77 points at 2,995.37, and a turnover of NZ$68.3m.
Base metals on the London Metal Exchange ended higher in a commodity-wide rally that broke away from a weaker euro and falling equity markets. Aluminium rose $8 (0.38%) to $1,978 while copper firmed $155 (2.38%) to $6,670 and nickel added $290 (1.54%) to $19,090. Zinc strengthened $55 (3.04%) to $1,865 and lead gained $40 (2.25%) to $1,820. Comex copper was last quoted at 302.65 US cents per pound.
Gold futures closed higher as bargain hunters snapped up prices at two-month lows, with gains limited by increased investor focus on the risks of deflation. Spot gold was last quoted at $1,190.90. Comex gold futures climbed $9.80 (0.83%) to $1,191.70. Spot silver was last quoted at $17.66.
Oil reversed an early-morning drop to settle higher ahead of inventory reports, as investors keyed on positive elements in the latest batch of largely disappointing corporate earnings. West Texas Intermediate was last quoted at US$77.44 per barrel.
At 07:45 a.m. (AET) the US dollar was quoted at 0.7763 euros, 87.47 yen, 1.133 AUD and 65.49 pence.