Stocks struggled Tuesday afternoon, as investors absorb Monday's rally. There could be some panic buying for those who have missed out on the rally that began in March, says S&P MarketScope.
Around 3:10 pm ET Tuesday, the 30-stock Dow Jones industrial average was up 7.71 to 9,294.27. The broad Standard & Poor's 500-stock index edged up 0.23 point to 1,002.86. And the tech-heavy Nasdaq composite index lost 3.76 points to 2,004.85.
On Monday, a report showing a pickup in manufacturing activity and optimism about an economic recovery helped push the S&P 500 index above 1,000 for the first time since Nov. 4, 2008. And the Nasdaq index closed above 2,000, the first time since Oct. 1, 2008.
Treasuries turned lower after starting higher on Tuesday. The dollar index edged higher. Gold and silver futures moved higher. Oil futures were mixed before tomorrow's inventory data.
The Wall Street Journal reports that the Securities and Exchange Commission may clamp down on flash trading, a practice that some critics say gives an unfair advantage to some traders by giving them an early look at buy and sell orders. The newspaper reports that SEC Chairman Mary Schapiro said she has instructed SEC staff to explore "an approach that can be quickly implemented to eliminate the inequity that results from flash orders." Flash trading, which routes stock trades through private liquidity pools before being sent to other exchanges for filing, has come under increasing fire from critics in Congress and elsewhere in recent weeks. "Under the rule-making process, such a proposal to eliminate the ability to flash orders would need to be approved by the commission and be open to public comment," she said.
Most major U.S. stock exchanges have said they would not protest if the SEC moves to curb some of these practices. In a statement, Sen. Charles Schumer (D., N.Y.) said he spoke with Schapiro, who informed him of an imminent ban during a telephone call Monday. The ban will come as part of a broader look at dark pools -- electronic trading venues where money managers trade large blocks of shares anonymously -- and high-frequency trading, he said.
In economic news Tuesday, consumer spending rose 0.4% in June, while personal income dropped 1.3% after rising 1.3% in May. The data are roughly in line with the consensus estimates of 0.3% and negative 1.0%, respectively. The personal income swing was caused by tax rebate payments in May, which caused that month to jump. The saving rate has dropped back down to 4.6% from 6.2% in May, as expected. "Overall, the report shows a somewhat healthier consumer than we had previously thought, and is thus optimistic for future growth, with the third quarter now likely to be slightly positive for GDP," says David Wyss, chief economist at Standard & Poor's.
Also, pending home sales for June rose 3.6% -- the fifth straight monthly gain.
Among stocks in the news Tuesday, General Electric (GE) reached a settlement with the SEC, without admitting or denying allegations of any wrongdoing, agreeing to pay civil penalty of $50 million. This concludes the SEC's investigation of accounting issues at GE relating to four accounting matters in 2002 and 2003. GE has previously corrected for the effects of these matters in its financial statements in SEC filings made between May 2005 and February 2008. No further corrections are required.
Caterpillar (CAT) reaffirmed its 2009 guidance for revenue of $32-$36 billion and EPS of $1.15-$2.25 excluding redundancy costs. The company also forecasted EPS in the $8-$10 range within five years, if the global economy experiences a "normal" recovery cycle.
PepsiCo (PEP) agreed to buy its two biggest bottlers, Pepsi Bottling Group (PBG) and PepsiAmericas (PAS), for $7.8 billion. The world's second-biggest drink maker said Tuesday it will pay $36.50 per share for Pepsi Bottling Group and $28.50 per share for PepsiAmericas. Both offers are half stock and half cash. The bottlers had rejected an earlier buyout offer worth a total of $6 billion, saying it undervalued them.