Stocks recouped earlier losses to end Tuesday modestly higher, as investors set aside nervousness over an uneasy start to the second-quarter earnings season, marked by weak results from Alcoa Inc. and a sales warning at Lucent Technologies Inc.
With no economic data scheduled, the market focused on the impact of higher interest rates and energy costs on corporate profits. Disappointments from Dow Jones industrial Alcoa and Lucent dragged the major indexes sharply lower before they rebounded late in the session — a sign that uncertain investors lacked information to drive stocks in one direction.
Many on Wall Street were hoping for strong earnings growth from companies in the Standard & Poor’s 500-stock index to help stocks rally after several weeks of aimless trading. But while investors have been troubled by a handful of recent profit warnings, the bulk of earnings have yet to come, analysts said.
“When the question is how much economic growth is going to slow, people are going to wait and see how profit reports come in before they make new commitments,” said Susan Malley, chief investment officer of Malley Associates Capital Management. “We’re continuing to put money into the market, but not racing. In certain areas, we want to get as much information as we possibly can.”
The Dow Jones industrial average finished the day up 31.22 points, or 0.28 percent, after tumbling as much as 75 points earlier. The the broader Standard & Poor’s 500-stock index was up 5.18 points, or 0.41 percent, at the close, while the Nasdaq composite index, full of technology stocks, rose 11.93 points, or 0.56 percent.
Bonds rallied, with the yield on the 10-year Treasury note sliding to 5.11 percent from 5.13 percent late Monday. However, the 2-year yield stood at 5.16 percent; inverted bond yields, in which short-term rates are higher than long-term, signal expectations for slowing economic growth.
A series of deadly explosions on several commuter trains in Bombay stirred some fears about terrorism and rattled U.S.-traded shares of India-based companies, with Tata Motors Ltd. sliding 48 cents to $16.50 and Videsh Sanchar Nigam Ltd. falling 51 cents to $16.76.
Overseas markets retreated on the news: Britain’s FTSE 100 fell 0.67 percent, Germany’s DAX index lost 1.58 percent and France’s CAC-40 tumbled by 1.37 percent. Japan’s Nikkei stock average, which closed before the blasts, finished the day with a loss of 0.51 percent.
Tuesday’s finicky trading — which followed an equally indecisive session Monday — came as further evidence of Wall Street’s persistent confusion about the economy. Investors have become fearful that while rising interest rates were keeping inflation contained, they may be stunting economic growth and eating into corporate profits. Those worries were realized when Lucent, diversified manufacturer 3M Co. and software maker EMC Corp. said their results would miss analysts’ predictions.
Analysts were nonetheless upbeat about second-quarter earnings given the anticipated slowdown in economic growth during the latter half of 2006.
“I think although earnings are going to be strong, they’re going to grow at a slower rate than over the last six months,” said Steve Neimeth, senior vice president and portfolio manager at AIG SunAmerica. “With interest rates and energy going higher and the consumer weakening, there may be risks to those higher estimates.”
Rising crude oil prices added to the market’s anxiety as energy traders monitored developments in talks with Iran over its nuclear arms program, and as they awaited the weekly update on U.S. reserves Wednesday.
Elsewhere, the U.S. dollar slipped against the Japanese yen and was barely changed versus European currencies. Gold prices jumped to about $645 an ounce.
Aluminum producer Alcoa saw a 62 percent jump in quarterly profit, helped by soaring metal prices during the period, but its revenue nonetheless fell shy of estimates. Alcoa fell $1.63 to $31.78.
Telecom equipment maker Lucent, which is being acquired by French rival Alcatel SA, said its income and sales for the June quarter would be less than analysts expected. Lucent dropped 15 cents to $2.19, and Alcatel lost 59 cents to $11.71.
Pepsi Bottling Group Inc. posted better-than-forecast earnings and revenue for the quarter and boosted its annual guidance. Pepsi Bottling gained $1.61 to $33.96.
Several other major companies were scheduled to release earnings this week, including PepsiCo Inc. on Thursday morning and Dow component General Electric Co. on Friday. PepsiCo rose 64 cents to $61.59, while GE slid 19 cents to $33.26.