US stocks higher on Tuesday, with the Dow ending at a 6 month high, after a volatile session in which investors weighed better than expected corporate earnings with Federal Reserve Chairman Ben Bernanke's warning that the economic recovery would be slow. The DJIA closed 67.79 points higher at 8915.94, closing at its highest level since January 6. The S&P500 closed 3.45 points higher at 954.58 and the Nasdaq finished 6.91 points higher to finish at 1916.20. After the closing bell, Apple posted second quarter profit of $1.35 per share on revenue of $8.34bn. That easily beat Wall Street estimates of $1.17 per share earnings and revenue of $8.2bn. Apple shares rose 3 percent in after hours trading. Also after the close, Yahoo said revenue fell by 13 percent from the same quarter a year earlier to $1.57bn. After taking out traffic acquisition costs, however, Yahoo posted sales of $1.14bn, in line with analysts’ expectations. The stock fell 4 percent after hours.
Caterpillar rose 8 percent after issuing a positive outlook, although even bigger gains were pared after executives warned in a conference call that waning demand would make for a tough third quarter. The company said that it is seeing signs that stabilization in the global stimulus efforts, particularly in China, are beginning to work. For the second quarter, Caterpillar posted better than expected earnings on sales that fell short of expectations. However, the company said its third quarter would be tough and that it could post a loss for that period and that it would be forced to implement rolling plant closures.
Merck and Schering Plough announced second quarter earnings before the bell. Merck reported earnings per share of 83 cents excluding charges, beating expectations of 77 cents. Schering reported 46 cents earnings per share excluding charges, which was close to estimates, and up slightly from 45 cents in the year ago quarter.
In a prepared testimony before a House committee, Ben Bernanke said the pace of economic decline has slowed significantly, but the labour market has gotten worse. He cautioned that improvement is uncertain and likely to be gradual going forward. Prior to his testimony, Bernanke outlined his exit strategy from the current low interest rate policy in a Wall Street Journal guest column. Bernanke defended the aggressive roles of the Fed and its ballooning balance sheet in the current crisis, saying "These actions have softened the economic impact of the financial crisis".
Treasury prices rose, with the yield on the 10 year note falling to 3.46 percent from 3.61 percent.
US light crude rose 74 cents to $64.72 a barrel. The weekly crude oil inventories report from the Energy Information Administration is due today.
COMEX gold for August delivery fell $1.90 to $946.90 an ounce.
The Nikkei average rose 0.7 percent today to hit its highest in more than two weeks as technical buying boosted futures prices, but gains were capped as exporters such as Canon Inc were soft due to the yen's strength. Shin-Etsu Chemical jumped after the Nikkei business daily said its unit Shin-Etso Handotai is in talks to raise the price of 300mm semiconductor wafers by 30-40 percent. Analysts said one key technical level for the Nikkei was 9,600, just under where the 25 day moving average comes in, and that the index holding above that level prompted some trend following funds to buy stock futures. The Nikkei average closed 71.14 points higher at 9723.16, the highest since July 3.
UK stocks closed higher on Tuesday, boosted by supermarkets after a trading update from William Morrison and after strong US quarterly results, with miners also lending support. The FTSE100 closed 37.55 points higher at 4481.17. The index rose following upbeat US quarterly results from Caterpillar, which overshadowed Federal Reserve Chairman Ben Bernanke's cautious outlook on the economy. William Morrison was the highest gainer, up 8.2 percent after the company said it expected full year results to be ahead of expectations. Tesco and Sainsbury climbed 1.4 and 3.1 percent respectively. Next also gave encouraging signs, the company raised its profit guidance after clothing sales were boosted by good summer weather. The shares however, fell 1.6 percent, as investors took profits after a strong run in the share price. Miners added the most points to the index, with copper hitting nine month highs earlier in the session as analysts said the metal looked strong fundamentally. Xstrata, Antofagasta, Rio Tinto, Anglo American and BHP Billiton added between 2.3 and 4.1 percent.
Energy stocks were also in demand, with BP, Royal Dutch Shell and Cairn Energy up between 0.4 and 1.9 percent.
GlaxoSmithkline rose 1.7 percent ahead of second quarter results today.
Banks were the biggest drag on the index, with HSBC dropping 1.6 percent amid concern a recent rally was overdone as the outlook remains fragile. HSBC declined to comment on the price move.
Friends Provident was among the heaviest fallers, off 2.5 percent after it rejected a revised offer from Resolution, saying the firm's structure was "totally inappropriate" for a public company.