Bernanke warning fails to curb cheer
THE Dow rose yesterday as a solid profit from Caterpillar eclipsed unease about the company’s outlook for the current quarter, while both the Nasdaq and the S&P 500 clung to tiny gains after a round of profit-taking.
Trading was choppy, with the broader market initially charging higher after the open and the benchmark S&P 500 hitting a fresh 2009 intraday high as it extended its rebound from the 12-year lows of early March.
Heading into yesterday’s session, investors were encouraged by another round of strong profit reports from major bellwethers that included drugmaker Merck, but that optimism was met with a dose of reality when heavy equipment maker Caterpillar warned the current quarter could be tough.
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 – a major driver of US economic growth and corporate profits.
The Dow Jones industrial average gained 43.76 points, or 0.50 per cent, to 8,891.91. The Standard & Poor’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.
Shares of Caterpillar, up 8.1 per cent at $39.62, gave the biggest boost to the Dow, but were off the day’s high after the company said it expects the third quarter to be the year’s weakest and “extremely challenging”.
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.
The stock, up 6.2 per cent at $29.67, ranked second among the Dow’s biggest advancers. The pharmaceuticals index was up 1.5 per cent.
But shares of United Technologies, 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.
On Nasdaq, shares of iPhone maker Apple were a top drag, falling 1.2 per cent to $151.11.
The technology bellwether posted it quarterly results after the bell.
In regulatory news, the US Treasury Department sent to Congress a draft bill that would curb the power of credit ratings agencies.