Stocks have risen slightly in the US after companies reported higher earnings but gave mixed forecasts about how the fragile economy and rising costs will affect their growth.
Target, Staples and Dell reported earnings for the last quarter that were above analysts’ forecasts.
Companies in the Standard & Poor’s 500 are on track to report higher profits for a ninth straight quarter. But economic growth is weak around the world, and some economists worry that a second recession may be coming. That could hurt companies’ earnings in the future – and kept investors from buying with more enthusiasm today.
Dell’s forecast added to investors’ concerns: It cut its prediction for revenue growth this year. Target and Staples gave profit forecasts that were above Wall Street’s expectations.
The Dow Jones industrial average rose 4.28 points to 11,410.21, while the S&P 500 rose 1.12 to 1,193.88. The Nasdaq composite fell 11.97 to 2,511.48.
Seven of the 10 sectors that make up the S&P 500 rose. The biggest drops came from technology stocks, which fell 0.8% after Dell cut its forecast.
“There are a whole bunch of contradictory signals in the system now, and it’s hard to tell which way to go,” said Charlie Smith, chief investment officer of Fort Pitt Capital Group.
Investors are still worried about Europe. Some countries have borrowed so much that they may not be able to repay their bonds, and economic growth there has slowed. Concerns about a possible default by a European country have dominated the market in recent weeks, along with worries about the slow US economy.
Another concern Wednesday: Companies are contending with rising costs. Higher food prices helped push inflation at the wholesale level to 0.2% in July, according to a government report That compares with a 0.4% drop in June, but is still well below inflation levels earlier this year when violence in the Middle East forced oil prices higher. In February, wholesale prices rose 1.5%.
Economists say rising inflation reduces the chances that the Federal Reserve could announce another round of bond purchases to help the economy, a move called quantitative easing. The Fed just ended its second round of purchases, known as QE2, in June.
“QE3 could be a hard sell” given higher inflation, Credit Suisse economists wrote in a report. They expect the government to report that consumer prices rose 0.2% in July on Thursday.