US Stocks Turn Mixed On Disappointing Boeing Earnings




-The Dow Jones Industrial Average pulled back modestly Wednesday after briefly rising above the 12000 mark for the first time in nearly three years as investors digested resurgent home sales and President Barack Obama's State of the Union address.

The Dow was up 5.5 points to 11983 in mid-day trading, dragged down by disappointing earnings from Boeing. Leading on the upside was Dupont, up 2.7%. A finish above 12000 would reclaim a level that the blue-chip index last surrendered in June 2008.

The Nasdaq Composite gained 16 points to 2735, while the Standard & Poor's 500-stock index was up five points at 1296, putting it on the cusp of 1300, a level it last held in August 2008.

The traversing of the 12000 barrier, while temporary, was the latest reminder of the durability of the stock market bull run on a trading day dominated by headline news from the government and the Federal Reserve, whose massive interventions helped propel markets to its current levels.

The Dow made its first pass at 12000 in 2006, as credit expansion fueled a home-buying binge that eventually ended in the 2007-2008 housing bust. From a peak of 14198.10 in October 2007, the market tumbled to a March 2009 low of 6469.95, wiping out more than half of the blue-chip index's market capitalization.

However, a combination of fiscal and in particular monetary stimulus helped fuel optimism in the market. Since the Federal Reserve made clear its plans to embark on a second massive wave of asset buying last August, the market has gained nearly 20%.

The bull market's reliance on the Fed, however, has had some investors questioning the durability of the rally.

"Corporate earnings have been so dramatically better over the last two years that, even though it hasn't equated in a better economy, people see these earnings and want to get involved," said Peter Costa, a New York Stock Exchange floor trader with Empire Executions. "After the housing bubble that burst in 2007-08, I think we'll probably never see those levels again.... Nine to ten percent of our people are just trying to make ends meet, and I'm not sure you can get that sort of a run-up when so many people are just trying to get basic needs met."

Wednesday's moves came after Obama's State of the Union speech Tuesday night challenged lawmakers in both major parties to rise above partisan divisions to tackle problems that will allow the U.S. to compete in the global economy. Among his proposals, the president called on Congress to lower the corporate tax rate by closing industry-specific loopholes and find spending cuts across the government. The president also called for a five-year freeze on nondefense discretionary spending.

"A lot of what he said could have been said by a Republican," said Doug Roberts, chief investment strategist at Channel Capital Research. Mr. Roberts said much of the expectations of President Obama's move to the center had already been factored in by the market, but Tuesday's speech were still important for reaffirming market expectations of a more centrist government.

New-home sales data also came in much stronger than expected, pushing the market higher. Sales increased 17.5% compared with the prior month, rising to a seasonally adjusted annual sales pace of 329,000. The increase was driven by a nearly 72% jump in the West. Economists had expected an increase to an annual rate of 299,000. The median sales price for a new home sold in December was up 8.5% from the same month a year ago.

Investors are still awaiting the latest statement from the Federal Open Market Committee at 2:15 p.m. EST. The market will be watching for confirmation that the central bank still sees the economy as improving, but still in need of its stimulus. Investors are also curious to see how many dissenters there will be to the continuation of the quantitative-easing program, given that there will be a different mix of Fed presidents voting. Just one or two of the Fed presidents are expected to dissent, so no policy changes are likely.

Leading the way on Wednesday were materials and energy stocks. AK Steel Holding rose 4.1%, Cliffs Natural Resources gained 3.1% and U.S. Steel added 2.5%. Halliburton surged 5.5% and Baker Huges advanced 4%.

Among Wednesday's slew of earnings announcements, aerospace giant Boeing posted an 8.2% decline in fourth-quarter profit, despite a tax-related gain adding to the bottom line, as revenue and margins slid. Boeing offered a 2011 profit forecast of $3.80 to $4 a share, below FactSet Research consensus estimates of $4.59 a share. Shares fell 3.6%, the deepest decliner among the Dow's 30 components.

United Technologies fell 1.1% after strong gains on Tuesday. The maker of Otis elevators and Pratt & Whitney plane engines reported a 12% rise in profit to $1.2 billion as sales grew 6.3%, topping analysts' estimates. Revenue increased at five of the company's six segments.

Airline stocks were also bolstered by hopes that carriers will be able to continue increasing airfares amid rising passenger demand. US Airways Group soared 12% after swinging to a fourth-quarter profit, despite significantly higher fuel prices amid a rebound in demand and cost controls.

United Continental Holdings jumped 8.6% as revenues grew better than expected growth amid rising traffic and capacity. Even so, the company--reporting combined results for the first time since October's merger between UAL Corp.'s United Airlines and Continental Airlines--reported a widening loss.

American Airlines parent AMR Corp. gained 4.7% while Delta Air Lines added 2.1%.

Xerox tumbled 7.3% after fourth-quarter earnings declined 5%, hurt by restructuring costs and a modest first-quarter earnings outlook.

SAP AG gained 1.7% in New York after Europe's largest software maker showed operational strength, despite taking a fourth-quarter hit on charges of almost one billion euros to cover the costs of its lawsuit with rival Oracle. The German company said it would raise its dividend for 2010 by 20%, and it expects sales and profit growth in 2011.

Yahoo fell 2.8% after the Internet search company late Tuesday gave a current-quarter revenue forecast that fell short of Wall Street's expectations.

Toyota Motor shares lost 1.9% in New York after the auto maker said it was recalling more than 1.7 million vehicles worldwide to fix problems, including fuel-system defects.

The euro slipped to $1.3675, from $1.3685 late Tuesday, while oil edged up and gold fell. Treasurys slumped broadly, pushing the yield on the benchmark 10-year note to 3.395%.