By Anora Mahmudova and Carla Mozee, MarketWatch
Morgan Stanley disappoints; Delta and Halliburton top
estimates
NEW YORK (MarketWatch) -- U.S. stocks erased big, early losses
Tuesday, turning modestly higher in afternoon activity as worries
about deflation gave way to expectations the European Central Bank
will deliver more aggressive stimulus when it meets on
Thursday.
A renewed slide in oil prices initially put pressure on stocks,
with investors appearing skeptical about the ability of central
banks to combat deflationary forces. Those pressures seemed to
abate later in the session.
The European Central Bank is widely expected to announce a
government-bond-buying program on Thursday; however, the program's
scope may disappoint investors, analysts have warned.
U.S. markets were closed on Monday in observance of the Martin
Luther King Jr. holiday.
The S&P 500 (SPX) rose 3.73 points, or 0.2%, to 2,023.15
after trading as low as 2,004.43.
The Dow Jones Industrial Average (DJI) erased a triple-digit
decline to rise around 11 points, or 0.1%, to 17,522.65.
The Nasdaq Composite (RIXF) erased a loss to trade at 4,661.45,
a gain of 0.6%.
Ten-year Treasurys rallied but trimmed initial gains, leaving
the yield down more than two basis points to 1.8104%. The yield on
the benchmark debt has steadily declined over the past 12
months.
"The big elephant in the room is deflation, and many portfolio
managers are beginning to adjust their models to work in a
low-interest-rate environment," said Marty Leclerc, chief
investment officer of Barrack Yard Advisors. "That adjustment
period spells volatility."
Leclerc stressed that in the short term the environment will be
favorable for stocks, as investors may justify higher
price-to-earnings ratios when real interest rates are at zero.
Peter Cardillo, chief market economist at Rockwell Global
Capital, said the day's action is all about the fear of a global
economic slowdown. "We are in the midst of earnings, and markets
are not reacting to positive results, and the culprit is concern
about Asia and Europe," he said. "The bond market is afraid of
deflation, which is why we are seeing such low yields on long-dated
Treasurys."
In economic news, a gauge of confidence among home builders
ticked down this month by one point to 57, staying close to the
highest level since late 2005, according to National Association of
Home Builders/Wells Fargo data released Tuesday morning. Readings
above 50 signal that builders, generally, are optimistic about
sales trends.
Home-builder stocks were down sharply. PulteGoup Inc. (PHM) fell
more than 4% and D.R. Horton Inc. (DHI) declined 3.5%.
Tuesday has been a choppy day for equities. Stock futures had
been climbing after better-than-expected economic data from China,
whose gross domestic product expanded 7.4% last year, beating
market expectations of 7.2%. Still, that marked the slowest rate of
growth since 1990 for the world's second-largest economy.
Meanwhile, European equities traded near seven-year highs ahead of
an expected unleashing of a sovereign-bond-buying plan by the
European Central Bank when policy makers meet Thursday.
Earnings results: Morgan Stanley's (MS)quarterly results missed
analyst expectations, and shares fell.
Delta Air Lines Inc. shares (DAL) jumped after the company beat
estimates,reporting fourth-quarter revenue of $8.24 billion, up
4.6%.
Shares of Halliburton Co.(HAL) edged higher after the company
reported better-than-expected results but warned that 2015 could be
a challenging year for the oil-field services company, which is
planning to acquire Baker Hughes Inc. (BHI)
Consumer-products heavyweight Johnson & Johnson (JNJ) beat
profit expectations, but sales fell shy of estimates.
SAP SE (SAP) dropped its midterm profit-margin forecast and
reported a 1% decline in fourth-quarter profit, hurt by its shift
to cloud-based products.
Google Inc. (GOOG) is close to investing about $1 billion in
Space Exploration Technology Corp. to support its effort to deliver
Internet access via satellites, according to the Wall Street
Journal. Space X is backed by Tesla Motors Inc. (TSLA) chief Elon
Musk.
Twitter Inc.(TWTR) in a blog post Tuesday said it's buying
India-based mobile-marketing company ZipDial for an undisclosed
sum.
DreamWorks Animation SKG Inc.(DWA) last week started letting
workers go, the Wall Street Journal reported.
Other markets: Chinese stocks rose nearly 2% after Monday's
selloff and Japan's Nikkei Average closed 2.1% higher, its
strongest percentage gain in a month.
Gold futures (GCG5) rose more than 1% for their seventh
consecutive daily gain. Oil futures (CLH5) fell more than 4% to
close at $46.39 a barrel.
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