By Kaitlyn Kiernan
U.S. stocks were mixed Thursday as lackluster blue-chip earnings weighed on the Dow industrials, and the S&P 500 traded near its record close.
The Dow Jones Industrial Average dropped 52 points, or 0.3%, to 15322 in midday trade. On Wednesday, the Dow rallied 206 points, or 1.4%, after Senate leaders reached an agreement to raise the debt ceiling and reopen the government. The House voted Thursday evening to pass the deal, which will reopen the government through Jan. 15 and extend the debt ceiling through Feb. 7. President Barack Obama signed the bill after midnight.
The S&P 500 index rose five points, or 0.3%, to 1726, reversing earlier losses of as much as seven points. The index was just above its Sept. 18 closing high of 1725.52. The Nasdaq Composite Index added 12 points, or 0.3%, to 3852.
Growing expectations that the turmoil in Washington would keep the Federal Reserve from paring back its bond purchases drove down the dollar and pushed up Treasury prices. European stocks eased.
Mark Travis, chief investment officer at Intrepid Capital, which manages about $1.4 billion in assets, says with Janet Yellen scheduled to take over as chair of the Fed, the stock market should have a tailwind as long as inflation remains low and unemployment remains elevated.
But he says as investors bring more cash to the firm, he is finding it more difficult to invest prudently.
"By and large, we're sitting on our hands a lot," Mr. Travis said, though he says there are opportunities in the energy and mining sectors.
Meanwhile, John Manley, chief equity strategist at Wells Fargo's funds unit, which manages about $200 billion in assets, says investors still have to analyze the resolution reached in Washington.
"Investors need to digest how much of an impact this will have, and what the chances are of a big problem again a few months from now," said Mr. Manley said.
For now, Mr. Manley said corporate earnings will again be in focus. He has recommended clients look out to next year, when he sees stocks continuing to rise with Fed support and what he sees as decent corporate earnings growth.
Companies in the S&P 500-stock index are on track for 1.1% third-quarter earnings growth from last year, according to FactSet. Excluding J.P. Morgan Chase & Co.'s loss on hefty legal charges, they would be on pace for 3.6% growth.
"Generally speaking, we're going to get back to stock picking," said Dan McMahon, director of equity trading at Raymond James. "Now, it's all about earnings. We've got to get back to work."
The Dow industrials saw the biggest decline Thursday as two of the index's largest components--International Business Machines and Goldman Sachs Group--led losses.
International Business Machines slumped after reporting third-quarter revenue that fell short of analyst expectations amid a sharp decline in hardware sales. Net profit, however, topped estimates.
Goldman Sachs dropped after missing on revenue but topping earnings expectations, citing a period of slow client activity. Fellow Dow component UnitedHealth Group also dropped after matching forecasts on earnings and falling shy on revenue.
Verizon Communications gained after beating forecasts on earnings on strong wireless subscriber growth.
Shares of eBay fell after third-quarter revenue missed estimates and the online auctioneer provided a disappointing earnings outlook for the current quarter.
Despite Thursday's weakness, Raymond James's Mr. McMahon said it was difficult not to be optimistic, with the market trading close to all-time highs.
"Any selloff will be somewhat muted," he said. "We'll likely continue to bump along, and trend higher" through the end of the year.
Initial claims for jobless benefits in the latest week fell to 358,000 from the previous week's revised 373,000, compared with expectations of a drop to 330,000. The elevated level of claims continues to reflect processing delays in California.
The Philadelphia Federal Reserve's October index of manufacturing activity slipped less than expected to 19.8 from September's 22.3. Economists had forecast a drop to 15.
The yield on the 10-year Treasury note fell to 2.609% from 2.669% late Wednesday. Yields move inversely to prices. The dollar fell below 98 yen, while the euro pushed above $1.37 to approach an eight-month high.
October gold futures jumped 2.8% to $1,318.60. "The market was waiting for a selloff post the U.S. Congress deal which didn't happen, so some people are throwing in the towel on the short gold trade," traders on Citigroup's bullion desk reported.
November crude-oil futures lost 1.9% to $100.38 a barrel.
"Economic data has been delayed, distorted and depressed by the shutdown and it will not be until early next year that we can get a clear picture of the fourth quarter," said Keith Wade, chief economist at Schroders, which has $388 billion in assets under management.
"The risk of another political standoff will also weigh on Fed deliberations. As a result we would not expect tapering to begin until March next year, with the possibility it will be delayed until June," Mr. Wade said.
European stock markets pushed higher late in the day. The Stoxx Europe 600 rose 0.1%, while in London, the FTSE 100 index added 0.3%
Germany's DAX 30 index lost 0.6% after Germany's leading economic think tanks lowered a growth outlook.
Asian markets were mixed to mostly higher in the wake of the U.S.'s budget deal. Japan's Nikkei Stock Average rose 0.8% and Australia's S&P/ASX 200 gained 0.4%, while China's Shanghai Composite slipped 0.2%.
Write to Kaitlyn Kiernan at [email protected]