- The Washington Times - Wednesday, July 22, 2009

NEW YORK (AP) — The stock market rode higher on more good earnings news, extending a weeklong rally.

Stocks ended with moderate gains Tuesday, after a day of back-and-forth trading, as investors juggled better-than-expected results from Caterpillar with worries about regional banks.

Investors also digested a mixed report from Federal Reserve Chairman Ben Bernanke, who said the economy is still on track to recover this year, but slowly. He also predicted rising unemployment.

Analysts said the market’s more subdued tone was natural after stocks surged more than 8 percent since the start of last week.

Caterpillar joined other major companies in issuing an improved 2009 profit forecast. Second-quarter profits fell 66 percent but still came in ahead of expectations. Shares in the heavy equipment maker, considered a bellwether of the global economy, rose about 8 percent.

Banks stumbled after Regions Financial Corp., Comerica Inc. and Zions Bancorp posted second-quarter losses that stirred worries about rising loan losses, a persistent worry for banks as unemployment approaches 10 percent.

Meanwhile, unease about small-business lender CIT Group Inc. flared up again after the company said a $3 billion loan from bondholders still might not be enough to cover a cash drain. The stock market had risen broadly on Monday on hopes the company would be able to avoid bankruptcy.

David Chalupnik, head of equities at First American Funds, said it could be harder for stocks to push higher because investors are becoming harder to impress.

“Expectations are being ramped up,” he said. “As earnings continue to come out better than expected you may not get that lift anymore.”

According to preliminary calculations, the Dow Jones industrial average rose 67.79, or 0.8 percent, to 8,915.94. That is the seventh straight gain for the blue chips.

The Standard & Poor’s 500 index rose 3.45, or 0.4 percent, to 954.58.

The Nasdaq composite index rose 6.91, or 0.4 percent, to 1,916.20, its 10th straight advance.

Falling stocks narrowly outpaced those that rose on the New York Stock Exchange, where volume came to 1.2 billion shares compared with 1.1 billion Monday.

Bond prices jumped after Bernanke’s remarks. The yield on the benchmark 10-year Treasury note, which moves opposite its price, fell to 3.49 percent from 3.60 percent late Monday.

Treasury investors saw Bernanke’s remarks as reaffirming that the Fed would keep interest rates low for the time being — which supports the value of bonds already in circulation. His assurance that inflation would remain at bay also helped lift the bond market.

In Tuesday’s trading, Caterpillar rose $2.81 to $39.46 and was the biggest climber among the 30 stocks that make up the Dow.

Among financial companies, Regions Financial fell 62 cents, or 15.4 percent, to $3.42, Comerica slid $2.31, or 10.1 percent, to $20.51 and Zions fell $1.54, or 12.6 percent, to $10.68. Investors are worried that rising losses on loans will erode profits in the coming quarters.

Banks are suffering more losses on loans because unemployment remains at a 26-year high of 9.5 percent and is expected to rise. And home prices in many markets are still falling, leaving homeowners and banks holding assets that are losing value.

The dollar was mixed against other major currencies, while gold prices fell.

Oil prices rose 74 cents to settle at $64.72 a barrel on the New York Mercantile Exchange.

In other trading, the Russell 2000 index of smaller companies fell 1.74, or 0.3 percent, to 525.22.

Overseas, Britain’s FTSE 100 gained 0.9 percent, Germany’s DAX index rose 1.3 percent, and France’s CAC-40 rose 1 percent. Japan’s Nikkei stock average jumped 2.7 percent.

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