Investors await debt ceiling decision
U.S. stocks were little changed Wednesday, as investors moved to the sidelines to survey the latest twists in the debt ceiling drama.
The Dow Jones industrial average (INDU) rose 6 points, with Boeing (BA, Fortune 500) and Bank of America (BAC, Fortune 500) posting the biggest gains. United Technologies (UTX, Fortune 500) and Microsoft (MSFT, Fortune 500) dragged on the blue chip index.
The market’s softness came after U.S. stocks surged Tuesday, with the Dow staging its strongest one-day rally of the year, after President Obama indicated he would support a plan to raise the debt ceiling that had been floated by a bipartisan group of senators.
But investors remain cautious amid concerns that the Gang of Six’s plan may not have enough time or support to make it through Congressional negotiations to increase the debt ceiling by Aug. 2.
“Until this debt ceiling issue is fully resolved, the market will bounce around,” said Matt King, chief investment officer at Bell Investment Advisors. “This is the No. 1 issue for investors, and they don’t have a ton of confidence right now.”
After the debt ceiling debate plays out, King said the market will likely move higher — thanks to healthy second-quarter earnings results.
Of the 88 S&P 500 companies that have reported earnings so far, 78% of them have beat expectations, according to Thomson Reuters.
“Earnings have been strong, and we expect they’ll continue to be so,” King said, “But they won’t have a broad effect on the market until we can get beyond the debt ceiling issue.”
Yahoo (YHOO, Fortune 500) was among weakest performers on the S&P 500 and the Nasdaq, with shares falling 7%. The company reported weakness in display and search revenue, as well as a lower-than-expected outlook in its second-quarter earnings report Tuesday.
After the bell, Dow components American Express (AXP, Fortune 500) and Intel (INTC, Fortune 500) will issue their quarterly results.
Meanwhile, real estate site Zillow (Z) made its public debut on the Nasdaq on Wednesday under the ticker “Z.” The company’s stock soared 70%.
Tesla (TSLA) shares jumped 5% after the electric car company inked a deal to supply its electric battery and control technology to Toyota for $100 million, according to Tesla’s filing with the Securities and Exchange Commission.
American Airlines announced a plan Wednesday to replace one of the largest commercial airline fleets, with hundreds of new leased airplanes from Boeing and Airbus. Shares of AMR Corp (AMR, Fortune 500)., the parent company for American Airlines, rose 2%.
Wells Fargo (WFC, Fortune 500) agreed to pay an $85 million civil penalty for allegedly forcing borrowers into more costly mortgages, the Federal Reserve said. Shares of the bank were up 1.5%.
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