Last updated: February 26, 2008 9:44 pm

US stocks higher despite grim data

US stocks moved higher on Tuesday when investors weighed disappointing economic data against encouraging corporate news.

Economic data showed a stronger-than-expected uptick in January producer prices. A separate report showed a sharp fall in consumer confidence.

However, stocks reversed earlier losses after IBM raised the low end of its 2008 earnings outlook and said its board of directors had authorised a continuation of its stock buy-back programme with a $15bn repurchase. The group’s shares jumped 3.9 per cent to $114.38.

A report from research group ComScore said the number of clicks on paid advertising links on Google was down sharply, sending the search engine’s shares down 4.6 per cent to $464.19 and leading the Nasdaq Composite Index lower in early trade.

The US labour department’s producer price index, which measures inflation pressures before they reach the consumer, rose 1 per cent in January, while core inflation rose 0.4 per cent for the month.

The data fanned fears that the Federal Reserve might be forced to discontinue cutting interest rates.

By the close of trading in New York, the S&P 500 index was 0.7 per cent higher at 1,381.29, while the Nasdaq Composite had risen 0.8 per cent to 2,344.99 and the Dow Jones Industrial Average was 0.9 per cent higher at 12,684.92.

“The data add to the Fed policy dilemma, which is risk negative. But I suspect the market has taken this on board for now,” said Alan Ruskin, chief international strategist at RBS Greenwich Capital.

“Nonetheless, the Fed still stands out as a central bank that has to take greater account of downside growth risks, in effect trying to put aside the poor inflation data for now.”

In other data, the S&P/Case Schiller home price index showed home prices fell 8.9 per cent in the fourth quarter last year.

Consumer confidence fell more than forecast in February, to the lowest level in five years, as the labour market slowed and the economy faltered. Foreclosure filings nationwide climbed 57 per cent in January compared with last year, indicating that housing woes are deepening, according to a report from RealtyTrak.

The Conference Board’s index of confidence decreased to 75.0, from a revised 87.3 in January, which was lower than previously reported.

The employment outlook weakened and expectations for the next six months dropped to the lowest level since January 1991.

Retailers were in focus as a group of companies reported quarterly earnings. Macy’s said its profit had edged up 2.3 per cent in the fourth quarter when a tax settlement helped offset weaker-than-expected sales. The nation’s largest department store operator reported net income of $750m, or $1.73 a share, compared with $733m, or $1.40 a share, a year earlier. Its shares rose 7.1 per cent to $26.75 on the New York Stock Exchange.

Target ’s fiscal fourth-quarter net income fell 8.1 per cent, when growth in credit card operations could not offset weakness in core retail sales. Its shares were 3.1 per cent higher at $54.89. CBS reported a 15 per cent decline in fourth-quarter profits but beat earnings estimates. The company expects operating income growth of 3-5 per cent this year. Its shares were 0.9 per cent lower at $24.78.

RadioShack shares jumped 21.5 per cent to $19.13 as the retailer posted a 20 per cent rise in fiscal fourth-quarter profit.

HJ Heinz, the food producer, said its third-quarter profit held virtually steady compared with a year ago as sales growth offset the impact of a higher tax rate. Its shares were 0.8 per cent lower at $45.60.

Hedge fund group Och-Ziff Capital Management re-ported a net loss of $774.6m in its first earnings release.

Shares in the New York-based company were 7.3 per cent higher at $22.70. The loss for the fourth quarter compared with a $453m profit for the same quarter a year ago.

Stocks had staged a late-session rally in the previous trading session after ratings agency S&P affirmed its triple-A ratings on troubled bond insurers Ambac and MBIA.

The move helped soothe investors worried that downgrades of bond insurers could lead to more hefty writedowns at financial firms.

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