* Caterpillar sees tough Q3, stock cuts gains
* Fed Chairman Bernanke cautious about economy
* Dow up 0.5 pct; Nasdaq and S&P 500 inch up
* For up-to-the-minute market news click []
(Updates to late afternoon, changes byline)
By Ellis Mnyandu
NEW YORK, July 21 (Reuters) - The Dow rose on Tuesday as a
solid profit from Caterpillar Inc <CAT.N> eclipsed unease
about the company's outlook for the current quarter, while
both the Nasdaq and the S&P 500 clung to tiny gains after a
round of profit-taking.
Trading was choppy, with the broader market initially
charging higher after the open and the benchmark S&P 500
<.SPX> hitting a fresh 2009 intraday high as it extended its
rebound from the 12-year lows of early March.
Heading into Tuesday's session, investors were encouraged
by another round of strong profit reports from major
bellwethers that included drugmaker Merck & Co <MRK.N>, but
that optimism was met with a dose of reality when heavy
equipment maker Caterpillar warned the current quarter could
be tough.
In addition, U.S. Federal Reserve Chairman Ben Bernanke
said in testimony before a congressional panel that mounting
joblessness, slumping home values and tight credit were likely
to curb consumer spending -- a major driver of U.S. economic
growth and corporate profits. For details, see
[]
"People can get a bit euphoric with a couple of positive
economic numbers and earnings ... but you're going to have to
see how this pans out over the long term," said Stephen Carl,
principal and head of U.S. equity trading at The Williams
Capital Group in New York.
"I think you do a little profit-taking now, go through the
summer and see how the rest of second-quarter earnings come
out, and then kind of ascertain what's going on after that."
The Dow Jones industrial average <> gained 43.76
points, or 0.50 percent, to 8,891.91. The Standard & Poor's
500 Index <.SPX> was up just 0.06 of a point, or 0.01 percent,
at 951.19. The Nasdaq Composite Index <> was up 1.51
points, or 0.08 percent, at 1,910.79.
Shares of Caterpillar, up 8.1 percent at $39.62, gave the
biggest boost to the Dow, but were off the day's high after
the company said it expects the third quarter to be the year's
weakest and "extremely challenging." []
Merck said second-quarter earnings fell, hurt by lower
sales of its cholesterol drugs, but income from partnerships
and a rebound in sales of asthma drug Singulair helped the
drugmaker beat profit forecasts.
The stock, up 6.2 percent at $29.67, ranked second among
the Dow's biggest advancers. The pharmaceuticals index <.DRG>
was up 1.5 percent.
But shares of United Technologies Corp <UTX.N> , a
diversified manufacturer fell 2.2 percent to $53.76 after it
posted a 23 percent drop in profit and lowered its 2009
outlook. []
On Nasdaq, shares of iPod and iPhone maker Apple Inc
<AAPL.O> were a top drag, falling 1.2 percent to $151.11. The
technology bellwether is scheduled to post quarterly results
after the bell.
In regulatory news, the U.S Treasury Department sent to
Congress a draft bill that would curb the power of credit
ratings agencies. For details, see []
Moody's Corp <MCO.N> shares dropped 7.2 percent to $26.55,
and shares of McGraw-Hill Cos <MHP.N>, which owns Standard &
Poor's, fell 2 percent to $32.37.
Also on the defensive were shares of Regions Financial
Corp <RF.N> and Comerica Inc <CMA.N>, two large U.S. regional
banking companies. Both posted second-quarter losses as a
deteriorating commercial property market caused bad loans to
soar. [] Regions' stock slid 15.8 percent to
$3.40 and Comerica's stock lost 10.2 percent to $20.49.
The KBW Bank Index <.BKX> dropped 3.8 percent.
Troubled lender CIT Group Inc <CIT.N> warned on Tuesday it
could still file for bankruptcy if a debt swap failed, one day
after securing $3 billion in emergency financing from its
bondholders. [] Its stock tumbled 20 percent to
$1.00.
(Reporting by Ellis Mnyandu; Editing by Jan Paschal)
