(Updates to mid-afternoon, changes byline)
By Kevin Plumberg
NEW YORK, April 7 (Reuters) - U.S. stocks were little
changed on Monday, sharply paring earlier gains as fears about
corporate earnings cast a shadow over earlier optimism of signs
that the credit crisis was easing.
Shares of aluminum producer Alcoa Inc <AA.N> were the
biggest drag on the Dow, ahead of the release of its earnings
after the close. The release kicks off the first-quarter
reporting period, with earnings for S&P 500 companies expected
to decline 11.8 percent, according to Reuters Estimates.
Major stock indexes rallied for most of the session,
boosted by the financial sector on news that Washington Mutual
Inc <WM.N> is close to securing a $5 billion cash infusion. The
news on WaMu, the biggest U.S. savings and loan company, fueled
hopes that the Federal Reserve in mid-March had helped to
stabilize markets by helping JPMorgan Chase to take over Bear
Stearns.
"Those assumptions will face a reality check as companies
report first-quarter earnings over coming weeks, beginning
tonight with Alcoa, and as you get second-quarter guidance,"
said Jim Awad, chairman of W.P. Stewart & Co. Ltd. in New York.
"It's likely that the Fed created a bottom but that doesn't
mean we're off to the races. There will probably be more pain
to come," he said.
The Dow Jones industrial average <> was up 30.85
points, or 0.24 percent, at 12,640.27. The Standard & Poor's
500 Index <.SPX> was up 4.96 points, or 0.36 percent, at
1,375.36. The Nasdaq Composite Index <> was down 3.97
points, or 0.17 percent, at 2,367.01.
Shares of Alcoa lost 3.9 percent to $37.50.
Shares of WaMu, one of the biggest U.S. home mortgage
lenders, surged by up to about 36 percent, on hopes the
reported investment would ease the company's need for capital
as losses from subprime mortgages and other loans soar. For
details see [].
In afternoon trade, WaMu shares were up 27.8 percent at
$13.00.
The WaMu news pushed up the financial sector, which had
suffered as a result of taking billions of dollars of losses
from bad mortgages, and helped to lift the Standard & Poor's
500 index for the fifth day of the last six. The S&P financial
index was up 1.04 percent.
Overall, investor focus was slowly shifting to the positive
effects from fiscal and monetary stimulus, and away from fear
and where the next credit blow-up might occur.
Since the Federal Reserve in mid March said it would help
to finance JPMorgan Chase's takeover of Bear Stearns, the S&P
500 has risen around 7 percent.
"We believe we are now in a 'base-building' phase," said
Bob Doll, global chief investment officer for equities at
BlackRock, who helps to oversee $1.36 trillion in assets. "The
negatives in the market are becoming more transparent, which is
key to establishing a bottom." said Doll.
However, any rebound in the market since early last week
when Lehman Brothers Holdings Inc <LEH.N> said it had strong
demand for a share offering has lacked strong conviction. The
U.S. economy has continued to send negative signals,
particularly on Friday, when a report showed the biggest
monthly decline in U.S. nonfarm employment in five years.
Cisco Systems Inc <CSCO.O> was the second-biggest drag on
the S&P 500 on Monday, falling 1.35 percent to $24.07, after
JPMorgan Securities cut its revenue estimates on the network
equipment maker.
(Editing by Leslie Adler)
