NEW YORK – Stocks limped to a flat finish Wednesday as investors, listening Fed Chairman Alan Greenspan's (search) comments before Congress, tried to balance the good economic news with the likelihood of more interest rates hikes. Energy companies' shares rose after crude shot above $48 a barrel.
The Dow Jones industrial average (search) was down 2.44 points, or 0.02 percent, to end at 10,834.88. The Standard & Poor's 500 Index (search) edged up just 0.22 of a point, or 0.02 percent, to finish at 1,210.34. The Nasdaq Composite Index (search) was down 1.78 points, or 0.09 percent, to close at 2,087.43.
After the closing bell, Hewlett-Packard Co. (HPQ) rose 2 percent to $21.50, as it posted a quarterly profit that rose slightly, helped by gains across all of its businesses.
Greenspan told the Senate Banking Committee (search) the economy is in good health, but said interest rates are still "fairly low" after six straight increases, which was viewed as confirmation that more interest-rate hikes lie ahead.
While that helped support the overall market, it hurt interest-rate-sensitive stocks such as banks and financial services companies. The S&P index of financial stocks fell 0.6 percent. The dollar firmed against other currencies, gold declined and Treasuries weakened.
"Greenspan was clearly the story of the day and he didn't say anything unexpected -- and the market doesn't like uncertainty," said David Memmott, head of listed block trading, Morgan Stanley.
The chairman of the Federal Reserve (search) told Congress the U.S. economy entered 2005 in good shape but warned fiscal discipline was essential to meet future challenges.
"The problem for stocks is there's no end in sight," said Jack Ablin, chief investment officer at Harris Private Bank in Chicago. "Greenspan still thinks rates are too low, and he has no intention to stop raising rates. And history has shown the Fed doesn't just stop raising rates on its own. Something happens. We don't know what it will be, but I know that's the thing that keeps me up at night."
Oil prices were volatile, climbing $1.07 to settle at $48.33 as traders sifted through the government's weekly report on fuel inventories. Tensions in the Middle East and an OPEC forecast for rising demand contributed to the price rise. U.S. stores of crude and gasoline grew more than analysts had anticipated, but there was a higher-than-expected draw on distillate fuels, which include heating oil.
While high oil prices are a negative for stocks overall as they squeeze company earnings and cut consumer spending, they help oil companies. Among the gainers, Exxon Mobil (XOM) rose 2.7 percent, or $1.56, to $58.48, while ConocoPhillips (COP ) gained 2.9 percent, or $2.93, to $104.31. The S&P Energy Industry Group index rose 2.73 percent. Of the 28 stocks in the group, 16 hit lifetime highs Wednesday.
The Coca-Cola Co. (KO) rose 1.5 percent, or 65 cents, to $43.30, after the world's largest beverage maker reported a 30 percent rise in fourth-quarter earnings, and announced plans to increase marketing of Diet Coke to cater to a more diet-conscious public. The results, announced before the market opened Wednesday, beat Wall Street expectations.
Circuit City Stores Inc. (CC) shed 34 cents to $16.19 as the nation's No. 2 consumer electronics chain announced it plans to close 19 superstores, five regional offices and a distribution center by month's end. The retailer also said it has sold one of its buildings in its Richmond, Va., corporate campus.
Online travel and retailer IAC/InterActiveCorp (IACI) declined 6 percent, or $1.45, to $22.55, after the company swung to a net loss of $46 million on charges related to two of its businesses. Excluding those costs, earnings for the operator of Expedia.com, Home Shopping Network, Hotels.com and Match.com beat Wall Street's expectations.
Drug makers Pfizer Inc. (PFE) and Merck & Co. Inc. (MRK) dragged on the Dow as U.S. scientific advisers met to scrutinize data on the companies' arthritis medicines. Pfizer was down 1.6 percent at $24.81 and Merck fell 1.6 percent to $28.86.
Applied Materials Inc. (AMAT), the world's largest maker of semiconductor manufacturing equipment, was up 1 cent at $17.50 after quarterly profits more than tripled compared to last year's results, which were weighed down by restructuring charges.
While Greenspan's remarks pressured the rate-sensitive financial sector, housing stocks soared, with the Dow Jones Home Construction Index (search) climbing 2.12 percent. After several years of low mortgage rates, the real estate industry is threatening to become the next bubble, underscoring Greenspan's desire for higher long-term rates. Further highlighting the issue, the government's latest report on housing construction showed a 4.7 percent rise in January, the highest level of activity in 21 years. The increase surprised economists, who had forecast a 3.7 percent decline.
In other economic news, the Federal Reserve reported output at the nation's factories, mines and utilities was unchanged in January, a disappointment to analysts who had been expected a healthy 0.3 percent increase.
Trading was active, with 1.49 billion shares changing hands on the New York Stock Exchange, just above the 1.46 billion daily average for last year. About 1.89 billion shares were traded on Nasdaq, above the 1.81 billion daily average last year. Advancers outnumbered decliners on the New York Stock Exchange by about 9 to 8 and by about 16 to 15 on Nasdaq.
The Russell 2000 index, which tracks smaller company stocks, was up 3.91, or 0.62 percent, at 638.85.
Overseas, Japan's Nikkei stock average shed 0.38 percent. In afternoon trading in Europe, France's CAC-40 lost 0.53 percent, Britain's FTSE 100 fell 0.11 percent and Germany's DAX index was down 0.76 percent.
Reuters and the Associated Press contributed to this report.