U.S. stocks buoyed by data; Dow slips

August doldrums check Wall Street on below-average volume

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By Wallace Witkowski and Laura Mandaro, MarketWatch

SAN FRANCISCO (MarketWatch) — Most U.S. stocks advanced slightly Wednesday on light volume as investors sifted through mixed economic reports, but blue-chips lagged behind and finished lower on the day.

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The Dow Jones Industrial AverageDJIA -0.06%  traded between slight gains and losses within a narrow 55-point range and closed down 7.36 points, or less than 0.1%, at 13,164.78.

Shares of Merck & Co. M +0.78%  and Intel Corp. INTC -0.79%  led the blue-chip barometer lower, both falling about 0.8%. Shares of Caterpillar Inc. CAT -0.30% , which fell in sympathy with agricultural equipment maker Deere & Co. DE -6.28% , closed down 0.3%.

Early Wednesday, Deere turned in a third-quarter profit that fell short of Wall Street estimates, and cut its profit forecast for the fiscal year. Shares closed down 6.3%.Read more on Deere earnings.

Cisco Systems Inc. CSCO +1.05%  closed up 1.1% ahead of its release of fourth-quarter results after the bell. Shares added another 5% after hours after the company topped Wall Street estimates. Read more on Cisco earnings.

Cisco also hiked its dividend by 75%. Read more on Cisco dividend hike.

The S&P 500 index SPX +0.11%  started out lower and then reversed to close up 1.6 points, or 0.1%, at 1,405.53. The financial and consumer discretionary sectors led gains among the index’s 10 industry groups, and both closed up about 0.4%.

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July consumer prices flat

U.S. stock futures leaned lower as weakness in overseas markets put investors on the defensive, as U.S. consumer prices remained flat in July. Michael Casey has details on The News Hub. Photo: AP

The Nasdaq Composite COMP +0.46% rose 13.95 points, or 0.5%, to close at 3,030.93. Heavyweights Microsoft Corp.MSFT +0.23% and Amazon Inc.AMZN +1.81% closed higher, while Apple Inc. AAPL -0.14%  and Google Inc.GOOG -0.17%  finished lower.

“Today’s market represents the state of the economy pretty well: sluggish,” said Frank Fantozzi, president and senior adviser at Planned Financial Services.

And Fantozzi doesn’t foresee many investors coming off the sidelines any time soon. With a recent Gallup poll showing the congressional approval rating at an all-time low of 10%, investors and companies are frustrated with the gridlock in Washington and are likely to hold tight to their cash until there is some sort of resolution with the November elections, he said.

Ahead of the opening bell, the Federal Reserve Bank of New York said its manufacturing index dropped to negative 5.9 in August, the first instance of contraction in this gauge since October. Read more on Empire State.

But in a separate release, the Federal Reserve said the nation’s industrial production rose 0.6% in July, accelerating from prior months. Read more on output of factories, mines and utilities.

After the market open, the National Association of Home Builders said its survey of confidence climbed in August to its highest level in more than five years on expectations the U.S. housing recovery can continue. That, however, did little for stocks in that sector, with the iShares DJ U.S. Home Construction Index Fund ITB -0.12%  down 0.3%. Read more on home builder confidence.

Also Wednesday, the Labor Department said that consumer prices were unchanged for July, or rose 0.1% when excluding volatile categories like food and energy. Read more on consumer price data.

“We’ve had a mixed bag on the economic front; that’s pretty much what’s dominating trading,” said Michael Gibbs, co-head of the equity advisory group for Raymond James.

‘Anemic’ August trading volumes

Volume has been extremely light this month as a wait-and-see attitude toward major central banks’ plans on possible further stimulus, expected to be revealed in late August and September, keeps investors from piling into a rally that’s already sent the S&P 500 up about 11% from lows seen in early June.

In fact, if the economic picture continues to lean toward a slight improvement, that could knock the legs out of any plans the Federal Reserve may have had for further quantitative-easing measures. Read more about how further QE may be in jeopardy on MarketWatch.

“Volume has been anemic. If you’re pessimistic and wonder how long the rally can continue, the fact that it’s been anemic is another reason to be cautious,” said Michael Sheldon, chief market strategist at RDM Financial Group.

Indeed, Wednesday’s volume was even worse than the already-low average. A little more than 2.5 billion NYSE-listed shares and 1.4 billion Nasdaq-listed shares traded hands past midday. August daily trading volume has averaged 3.37 billion shares for NYSE-listed shares and 1.65 billion shares for Nasdaq-listed shares, according to Barclays.

“Investors are just regrouping. In the next couple of weeks, we’ll start to get more details on what [the Fed] has in mind for bond-buying, we’ll have more economic data under our belts,” and activity will pick back up, Raymond James’s Gibbs said.

Advancing stocks outnumbered decliners by 18 to 11 on the NYSE, making up 60% of its volume, and by 2 to 1 on the Nasdaq, making up 65% of its volume. 

Wallace Witkowski is a MarketWatch news editor in San Francisco.Laura Mandaro is a MarketWatch editor, based in San Francisco.