US equities search for direction

Shares in Caterpillar rallied as the company’s full-year earnings forecast beat analysts’ estimates, even though quarterly profits were disappointing.

The earthmoving equipment maker reported that net income in the fourth quarter fell 55 per cent to $697m as it wrote down $580m from an acquisition of a Chinese company due to an alleged accounting misconduct. Shares rose 2 per cent to $97.45.

Overall, US equity markets began the week on a slightly sour note as stronger-than-expected durable goods data did little to lift the markets.

A surprise jump in orders for durable goods at the end of last year indicates that companies did not hold back investment in 2012 as much as feared.

The benchmark S&P 500 index, however, closed 0.2 per cent lower at 1,500.18, a few points below its fresh five-year highs reached last week. Materials stocks were leading the losses while information technology stocks defied the general trend, pulled up by solid gains in Apple shares.

Markets, which have been rallying in the past few weeks, also saw a tick up in volatility.

The CBOE Vix index, which measures implied volatility in the S&P 500 and is seen as Wall Street’s “fear gauge”, rose 5.3 per cent. But at 13.2, it still remains well below its historical average.

Channing Smith, equity strategist at Capital Advisors, said that markets seem overbought at this point. “Earnings have been good but not great and companies are beating estimates that were lowered down considerably.

“We’ve had uninterrupted steady march for four weeks and a pullback, which seems likely, would be healthy,” he added.

The Dow Jones Industrial Average closed 0.1 per cent lower at 13,881.93, helped by gains at Caterpillar.

Hess jumped after announcing that it would sell 20 oil storage terminals in the US and the Caribbean and exit its refining business.

The move will free up $1bn of capital, which the company said it intended to use in oil and gas businesses. Its shares rose 6.1 per cent to $62.50.

Herbalife shares had a volatile session and closed down 8.6 per cent to $39.83, after regulators said they were taking action against an illegal pyramid scheme, without naming the company.

It was later revealed to be Fortune High Tech Marketing, a Kentucky direct seller.

The technology-heavy Nasdaq Composite finished 0.1 per cent higher at 3,154.30, lifted by hefty gains at its biggest component Apple .

Shares in the iPhone and iPad maker rose 2.3 per cent to $449.83, recovering some of the steep losses from last week that followed disappointing quarterly results.

Research In Motion shares dropped 7.7 per cent to $16.18 ahead of the launch of its new BlackBerry 10 operating system due on Wednesday. The stock has risen more than 130 per cent in the past four months, as investors bet on the new generation of smartphones.

Yahoo shares, which closed little changed at $20.31 on Monday, rallied in extended hours trading, after the internet group’s quarterly earnings beat estimates on revenues and profits.

Yahoo reported $1.2bn in revenues excluding traffic acquisition costs, as it benefited from higher advertising prices. Shares rose 3.3 per cent to $20.99 in after-hours trading.

Amazon , which is scheduled to announce quarterly results on Tuesday, was hit with its shares dropping 2.8 per cent to $276.04.

Petsmart shares were the worst performing on the S&P 500 after a downgrade from analysts at Nomura, dropping 9.1 per cent to $63.63.