Wall Street drifted to a modestly higher finish Monday, as investors sought bargains after last week’s sell-off and disappointing earnings in the financial sector raised fresh concerns about corporate profits.
Surprisingly strong earnings from Ford Motor Co., followed by the automaker’s extensive restructuring announcement, kept buyers in the market despite another sub-par earnings report from a major bank, this time from Bank of America Corp.
Yet despite the gains, there was a sense of increasing sobriety on Wall Street after Friday’s 213-point drop in the Dow Jones industrial average, and trading was light and erratic. But the fact that the markets did not dramatically continue Friday’s selling was a good sign of investor confidence, analysts said.
“You’re seeing a little bit of buying come in today, which you’d expect after a sell-off,” said Jay Suskind, head trader at Ryan Beck & Co. “The market is looking at what happened Friday rationally, and now it’s just a wait-and-see on how other bellwether companies do on their earnings.”
The Dow Jones industrial average finished the day with a gain of 21.38 points, or 0.20 percent, while the broader Standard & Poor’s 500-stock index added 2.33 points, or 0.18 percent. The Nasdaq composite index rose 0.77 point, or 0.03 percent.
Crude oil prices fell despite continued tensions in the Middle East and Nigeria. A barrel of light crude settled at $68.10, down 38 cents, on the New York Mercantile Exchange.
Bonds were little changed after a morning sell-off, with the yield on the 10-year Treasury note rising to 4.36 percent from 4.35 percent late Friday. The dollar was mixed against other major currencies.
In a light week for economic data, investors were disappointed in the Conference Board’s latest index of leading economic indicators for December, which rose just 0.1 percent. The index, a measure of future economic growth, was expected to rise 0.2 percent after a 0.5 percent rise in November.
That left the focus on earnings, and Ford delivered enough optimism to help Wall Street recover from Friday’s sell-off. The automaker said improved profits from its luxury brands and the sale of its Hertz rental car division helped deliver earnings that beat Wall Street estimates by 7 cents per share. Ford, which said Monday it would cut up to 30,000 jobs as part of a restructuring effort, rose 42 cents to $8.32.
Bank of America fell 23 cents to $43.96 after it became the latest major bank to miss analysts’ earnings forecasts. The nation’s second-largest bank by assets posted a drop in profits from the fourth quarter of 2004, and said weaker trading and increased consumer bankruptcies ate into earnings. The company missed earnings forecasts by 8 cents per share.
“If you roll back the tape to past quarters, you’ll find the same amount of fevered worry about whether or not companies would meet the numbers and whether earnings would be decent, and that kept stocks down at those times,” said Joseph Battipaglia, chief investment officer at Ryan Beck & Co. “Once again, we’re skeptical about earnings, and that puts a damper on the market short-term. But there’s still some potential for some decent surprises and upside from here.”
Some, however, felt last week’s sell-off was overdone. Analysts at Bear Stearns upgraded Yahoo Inc. to “outperform” from “peer perform,” saying last week’s downturn in the stock, prompted by the company’s missed earnings projections, overlooked the fact that the Internet services company was still very profitable. Yahoo gained 43 cents to $34.17.
In merger news, Albertsons Inc. added $1.31 to $25.42 after it agreed to be purchased for $9.7 billion by a consortium of investors led by Supervalu Inc., CVS Corp. and a private equity firm. The buyers will also assume $7.7 billion in debt. Supervalu climbed $2.13 to $33.98, while CVS slipped 17 cents to $26.96.
Overseas, Japan’s Nikkei stock average tumbled 2.14 percent. In Europe, Britain’s FTSE 100 was down 0.2 percent, France’s CAC-40 fell 0.45 percent and Germany’s DAX index slipped 0.01 percent.