Stocks end trading day with moderate gains

updated 6:57 p.m. ET July 14, 2009

NEW YORK - Investors got the solid results from Goldman Sachs they wanted on Tuesday, but the gains were modest after a big rally the day before.

Mixed economic data reminded investors of the challenges businesses still face and left the market zigzagging all day. Some stocks gained on a handful of strong earnings, while Treasurys tumbled on news of a jump in inflation.

The Dow rose 27.81, or 0.3 percent, to 8,359.49. The Standard & Poor's 500 index rose 4.79, or 0.5 percent, to 905.84, while the Nasdaq composite index rose 6.52, or 0.4 percent, to 1,799.73.

Investors were pleased that Goldman Sachs Group Inc.'s second-quarter earnings easily surpassed analysts' forecasts thanks to big gains in trading and underwriting. But the release of the results came as something of an anticlimax, as anticipation of a strong report sent the entire stock market soaring Monday.

Johnson & Johnson also had better-than-expected results, although its profits fell 3.5 percent.

In economic data, retail sales posted their largest gain in five months in June, but much of that increase came from higher gas prices. Prices for gas have fallen sharply since mid-June amid increasing concerns about energy demand, so the higher sales figures may not be sustainable.

Investors were also uneasy after a separate report showed wholesale prices rising far more than expected last month and the most since November 2007, due partly to higher energy prices. That sent Treasurys falling and their yields climbing.

The mix of earnings and economic reports over the next few weeks is likely to make for some difficult days on Wall Street. The stock market has already been drifting over the past month, having given up on a massive spring rally as troubling signs began to emerge on the economy including rising unemployment and waning consumer confidence. Unless companies start issuing promising outlooks for the second half of the year, it will be hard, if not impossible, for the market to resume that rally.

"We need a general consistent pattern of bullish news coming out to turn this market around," said Darin Newsom, senior analyst at DTN.

More than two stocks rose for every one that fell on the New York Stock Exchange, where volume came to a light 978.8 million shares, down from 1.2 billion Monday.

The yield on the 10-year Treasury note jumped to 3.47 percent from 3.35 percent as its price fell nearly a point. Long-term government debt tends to be sensitive to reports of higher prices, as inflation erodes the value of fixed-income securities over time.

Investors sent stocks sharply higher on Monday, lifting the Dow 2.3 percent, after Meredith Whitney, a respected banking analyst, upgraded her view on Goldman, stoking hopes that financial companies will show continued signs of improvement this quarter.

But Goldman's actual results had little impact as investors' focus quickly turned to the rest of the financial industry and what those reports might have to say about the state of the industry.

"Here we have a best-in-class sort of company reporting outstanding results," said Craig Peckham, an analyst with Jefferies & Co. "The earnings reports we get in the financial sector from here on out quite honestly are coming from companies that just don't have the same kind of cachet."

Goldman rose 22 cents to $149.66. Later this week, investors will get reports from JPMorgan Chase & Co., Bank of America Corp. and Citigroup Inc.

One troubling indication that the financial industry has not fully recovered: Commercial lender CIT Group Inc. is talking with the government about receiving emergency assistance to help solve liquidity problems. CIT rose 26 cents, or 19.3 percent, to $1.61 after tumbling 11.8 percent Monday.

There were mixed forecasts from several companies. Dell Inc. warned late Monday that quarterly gross margins will fall below first-quarter levels due to higher component costs and pressure to keep prices low. Shares sank more than 8 percent, falling $1.05, or 7.8 percent, to $11.97.

Railroad operator CSX Corp. said it expects shipping demand to sink by double-digits again this quarter, but not as drastically as the 21 percent decline in the second quarter. Shares jumped $2.26, or 7 percent, to $34.80.

Johnson & Johnson gained 51 cents to $58.23.

In other trading, the Russell 2000 index of smaller companies rose 3.21, or 0.7 percent, to 496.52. 

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