New York: The Nasdaq rose on Tuesday after an improved outlook from Texas Instruments lifted technology stocks, but news that 10 big banks will repay TARP funds failed to stir investor enthusiasm.
Shares of Texas Instruments Inc jumped 6.3% to $21.02 after the company raised its quarterly earnings and revenue targets, signaling improving demand in the chip market.
The PHLX semiconductor index climbed 4.5%.
“The guidance from Texas Instruments basically follows along with what Intel said mid-quarter that basically that there is a bottom forming and some first starts of improvement in the chip cycle,” said Fred Dickson, market strategist and director of retail research at DA Davidson & Co in Lake Oswego, Oregon.
“That implies orders for tech equipment are starting to show early signs of picking up.”
Stocks initially moved higher after the Treasury Department said 10 big banks will pay back $68 billion received under the Troubled Asset Relief Program, or TARP, to the government. But the market quickly fell back on concerns that the money could be put to better use by making loans to businesses and consumers, which would boost the economy.
“These banks want to pay back the TARP money almost immediately. What does that do to their balance sheet and their loaning capability?” said Carl Birkelbach, chairman and chief executive of Birkelbach Investment Securities in Chicago.
“If they were more concerned about the public, they would keep the cash and start loaning out money.”
The Dow Jones industrial average dropped 1.43 points, or 0.02%, to 8,763.06. The Standard & Poor’s 500 Index gained 3.29 points, or 0.35%, to 942.43. The Nasdaq Composite Index climbed 17.73 points, or 0.96%, to 1,860.13.
Dow near break-even for year
For the month, the Dow is up 3.1%. During Tuesday’s session, the Dow briefly turned positive for the year when it hit an intraday high at 8,803.26, or nearly 27 points above its year-end close, before erasing gains to end slightly lower. For the year, the Dow is down only 0.15%.
Energy stocks also moved higher as US crude oil futures ended above $70 a barrel for the first time in seven months, on a weaker dollar and a government forecast of higher demand in 2009.
The PHLX Oil Service Sector index rose 2.2%.
An auction of three-year Treasury notes in the early afternoon was met with solid demand, easing concerns that an oversupply of government debt could push interest rates still higher and increase the cost of borrowing to consumers and businesses.
However, those worries may resurface with the auction of 10-year notes and 30-year bonds later in the week.
General Electric Co, which makes engines for planes, said it expects orders this year to fall by 50%, knocking down shares of plane maker Boeing Co and United Technologies Corp, also a maker of plane engines.
Boeing shares fell 0.9% to $52.35, while United Technologies shares slid 1.7% to $55.52 and were among the top drags on the Dow.
In contrast, shares of conglomerate GE, a Dow component, inched up just 1 penny, or 0.07%, to $13.57.
The S&P 500 has rallied 39.3% since hitting a 12-year closing low on 9 March, leading analysts to speculate a correction was ahead, although recent dips have been brief.
Trading volume was low on the New York Stock Exchange, with about 1.06 billion shares changing hands, below last year’s estimated daily average of 1.49 billion, while on Nasdaq, about 2.17 billion shares traded, below last year’s daily average of 2.28 billion.