Bernanke warning fails to curb cheer

THE Dow rose yesterday as a solid profit from <strong>Caterpillar</strong> eclipsed unease about the company&rsquo;s outlook for the current quarter, while both the Nasdaq and the S&amp;P 500 clung to tiny gains after a round of profit-taking.<br /><br />Trading was choppy, with the broader market initially charging higher after the open and the benchmark S&amp;P 500 hitting a fresh 2009 intraday high as it extended its rebound from the 12-year lows of early March.<br /><br />Heading into yesterday&rsquo;s session, investors were encouraged by another round of strong profit reports from major bellwethers that included drugmaker <strong>Merck</strong>, but that optimism was met with a dose of reality when heavy equipment maker Caterpillar warned the current quarter could be tough.<br /><br />In addition, US Federal Reserve chairman Ben Bernanke said in testimony before a congressional panel that mounting joblessness, slumping home values and tight credit were likely to curb consumer spending &ndash; a major driver of US economic growth and corporate profits.<br /><br />The Dow Jones industrial average gained 43.76 points, or 0.50 per cent, to 8,891.91. The Standard &amp; Poor&rsquo;s 500 Index was up just 0.06 of a point, or 0.01 per cent, at 951.19. The Nasdaq Composite Index was up 1.51 points, or 0.08 per cent, at 1,910.79.<br /><br />Shares of Caterpillar, up 8.1 per cent at $39.62, gave the biggest boost to the Dow, but were off the day&rsquo;s high after the company said it expects the third quarter to be the year&rsquo;s weakest and &ldquo;extremely challenging&rdquo;.<br /><br />Merck said second-quarter earnings fell, hurt by lower sales of its cholesterol drugs, but income from partnerships and a rebound in sales of asthma drug Singulair helped the drugmaker beat profit forecasts.<br /><br />The stock, up 6.2 per cent at $29.67, ranked second among the Dow&rsquo;s biggest advancers. The pharmaceuticals index was up 1.5 per cent.<br /><br />But shares of <strong>United Technologies</strong>, a diversified manufacturer, fell 2.2 per cent to $53.76 after it posted a 23 per cent drop in profit and lowered its 2009 outlook.<br /><br />On Nasdaq, shares of iPhone maker <strong>Apple</strong> were a top drag, falling 1.2 per cent to $151.11. <br /><br />The technology bellwether posted it quarterly results after the bell.<br /><br />In regulatory news, the US Treasury Department sent to Congress a draft bill that would curb the power of credit ratings agencies.