Stocks Mixed on Falling Oil, Low Earnings

Stocks pared early losses and ended mixed Wednesday as investors weighed falling oil prices against lower-than-expected earnings from companies including Time Warner Inc. (TWX).

The Dow Jones industrial average (search) rose 13.85 points, or 0.13 percent, to close at 10,697.59. The Standard & Poor's 500 Index (search) inched up just 0.92 of a point, or 0.07 percent, to finish at 1,245.04. The Nasdaq Composite Index (search) fell 1.34 points, or 0.06 percent, to end at 2,216.81, after touching another 4-year high intraday at 2,219.91.

"You are seeing a little bit of a pause here, given the uncertainty related to oil prices," said John Caldwell, chief investment strategist at McDonald Financial Group. "After the great month we have had for stocks in July, a pause and even some profit taking is OK. I don't think investors should be too worried."

Oil pulled back from its earlier record high of $62.50 a barrel after U.S. data showed crude inventories piling up in the United States, the world's biggest consumer, defying expectations. Light, sweet crude for September delivery settled down $1.03 cents at $60.86 a barrel on the New York Mercantile Exchange (search).

But when the price of crude drops, it weighs on shares of oil companies like Exxon Mobil Corp. and ConocoPhillips. Exxon Mobil (XOM) fell 1.4 percent, or 81 cents, to $59 and dragged on the blue-chip Dow, while ConocoPhillips (COP) slipped 0.8 percent, or 48 cents, to $63.90.

That helped offset gains by Microsoft (MSFT), up 1.8 percent at $27.28 on speculation the world's largest software maker will announce another large increase in its annual dividend.

One day after the S&P 500 and Nasdaq composite index broke through their June 2001 levels, investors appeared willing to wait for better news. With the Labor Department's jobs report due Friday and the Federal Reserve's (search) latest decision on interest rates next Tuesday, investors were considered unlikely to bid stocks much higher in the meantime.

"I think this market is just going to have to grind higher, little by little, and probably sell off a little here and there, at least until the Fed meeting," said Scott Wren, equity strategist for A.G. Edwards & Sons.

Investors also were disappointed in the latest reading of the Institute for Supply Management's (search ) services index. The ISM index, which measures growth in the service sector of the economy, fell to 60.5 in July, lower than the 61 reading expected by economists and down from 62.2 in June.

Meanwhile, the Treasury Department (search) said it would resume selling 30-year bonds in early 2006 after a hiatus of more than four years, and scaled back its debt offerings this quarter to reflect an improved government budget outlook.

The yield on the benchmark 10-year U.S. Treasury note slipped to 4.30 percent on Wednesday from 4.34 percent on Tuesday, while its price rose 11/32 to 98-21/32. The 30-year bond's yield fell to 4.51 percent from 4.55 percent on Tuesday, while its price climbed 23-32 to 113-5/32.

Time Warner (TWX) fell 31 cents to $17.11 after the media conglomerate said it will set aside $3 billion to settle lawsuits filed by investors angry over the 2000 merger with America Online Inc. The company also posted earnings that, after one-time charges, were still short of Wall Street's expectations by a penny per share.

Oracle Corp. (ORCL), one of the biggest weights on the Nasdaq, dropped 1.5 percent to $13.38 on speculation that the software company may raise its bid to secure a controlling stake in Indian banking software firm i-flex.

Other companies reporting disappointing results included Duke Energy Corp. (DUK), which posted a 28.5 percent drop in second-quarter earnings, and wireless network equipment maker Alvarion Ltd., which recorded a second-quarter loss.

Duke shares slipped 16 cents to $29.60 on the NYSE, and Alvarion dropped 6.7 percent to $8.85 on Nasdaq. Heavy equipment maker Caterpillar (CAT) eased 34 cents to $54.12 and jet manufacturer Boeing slipped 37 cents to $65.96, both on the NYSE.

In merger news, German sports apparel company Adidas-Salomon AG said it will purchase American rival Reebok International Ltd. (RBK) for $3.8 billion, or $59 per share. The move will give Adidas, a strong European brand, more exposure to the North American market and allow it to better compete with market leader Nike (NKE). Reebok surged 30 percent, or $13.19, to $57.14, while Nike gained $1.09 to $86.92.

Record sales helped Internet media company RealNetworks Inc. (RNWK) to post a profit in the second quarter, beating Wall Street's break-even estimates. The company also raised its full-year profit forecasts. RealNetworks climbed 7.9 percent, or 40 cents, to $5.45.

XM Satellite Radio Holdings Inc. (XMSR) was up 46 cents at $34.90 as media reports said the satellite radio provider struck a deal with The New York Times Co.'s new radio unit, which will provide news and feature programming for XM. The New York Times rose 32 cents to $31.34.

Shares of Eli Lilly and Co. (LLY) slid after the drugmaker said it had received a subpoena from the Florida attorney general's office seeking information about some of its Medicaid-related sales. Its shares dropped 2.3 percent to $54.72.

Volume was active, with about 1.52 billion shares changing hands on the New York Stock Exchange, above last year's daily average of 1.46 billion shares, while on the Nasdaq, about 1.82 billion shares traded, slightly above last year's daily average of 1.81 billion.

Decliners outpaced advancers on the NYSE by a ratio of about 9 to 8, and on Nasdaq, by about 9 to 7.

The Russell 2000 index of smaller companies fell 5.13, or 0.75 percent, to 683.38.

Overseas, Japan's Nikkei stock average rose 0.35 percent. In Europe, Britain's FTSE 100 closed up 0.09 percent, France's CAC-40 lost 0.17 percent for the session, and Germany's DAX index fell 0.20 percent.

Reuters and the Associated Press contributed to this report.