Tue, February 23, 2010
Stocks dipped early Tuesday as investors remain cautious about the strength of a consumer-led economic recovery.
Investors are sorting through another round of retailers' earnings that show profitability is improving, but sales growth remains slow. Home Depot Inc., Sears Holdings Corp., Macy's Inc. and Target Corp. all reported better-than-expected earnings.
A key report on consumer confidence is due out later in the morning that will provide further clues about shoppers' psyche.
Consumers are considered vital to a strong, sustained economic recovery because their spending accounts for more than two-thirds of all economic activity.
Investors are also awaiting Federal Reserve Chairman's semiannual testimony before Congress about the health the economy. The Fed surprised investors last week by hiking rates it charges banks for emergency loans. Traders will want Bernanke to continue to provide reassurances that it plans to keep its benchmark rate at historic lows to encourage growth. He testifies Wednesday and Thursday.
In early morning trading, The Dow Jones industrial average fell 10.05, or 0.1 percent, to 10,373.33. The Standard & Poor's 500 index dropped 1.70, or 0.2 percent, to 1,106.31, while the Nasdaq composite index fell 4.67, or 0.2 percent, to 2,237.36.
A modest increase in sales and cost-cutting helped Home Depot's profit top expectations. The home improvement retailer also increased its dividend and outlook, evidence it is confident about the strength of an eventual recovery. Competitor Lowe's Corp. on Monday also raised its outlook, but took a cautious tone about growth saying it's likely to be modest and slow in the near future.
Like Home Depot, Sears Holdings said falling expenses and a slight boost in sales helped its profit top forecasts. Shares of both Home Depot and Sears Holdings rose in early trading.
Macy's and Target also reported upbeat quarterly earnings, but their shares fell modestly.
The Conference Board is expected to show consumer confidence fell slightly in February, after three straight months of gains. Its index likely fell to 55 from 55.9, according to economists polled by Thomson Reuters.
The reading still falls well short of what is considered strong — a reading above 90 means the economy is on solid footing. However, the index has rallied over the past year after bottoming at 25.3 in February 2009.
(Agencies)
