Doubts About Economy Leave Stocks Flat

A mixed report on the state of the global recession and falling oil prices weighed on stocks today, leaving major U.S. indexes mostly flat at the end of trading.

The Dow Jones industrial average rose 14.81, or 0.2 percent, to close at 8178.41, while the broader Standard & Poor's 500-stock index fell 1.47, or 0.2 percent, to 879.56. The technology-focused Nasdaq rose 1 point to 1747.17.

Wall Street had rallied in recent months as data showed the economy was deteriorating at a slower rate. Now the focus has turned to when an economic recovery will materialize and how corporations have fared in the downturn.

After the market close, Alcoa reported a second-quarter loss of $454 million, compared with a profit of $546 million in the comparable period a year earlier. Revenue fell 41 percent, to $4.24 billion.

The aluminum maker is the first of the 30 blue-chip companies in the Dow to report results for the quarter that ended June 30. Alcoa shares rose 5 cents, or 0.5 percent, in regular trading to close at $9.46.

S&P 500 companies are expected to report a 35 percent drop in earnings for the second quarter, according to a survey from Thomson Reuters. Energy, financial and material companies are expected to report the biggest losses.

Expectations have been set so low that investors will be looking for improvements not only in corporate profitability but in revenue growth, analysts said. Firms can improve profitability by cutting their workforce and other expenses, but an increase in revenue would indicate more consumer demand, they said.

"Investors are weary and are going to be looking beyond cost cutting. People are starting to poke around the economy and see if there is anything there," said Jack Ablin, chief investment officer at Harris Private Bank in Chicago.

Stocks had initially recorded modest gains this morning after the International Monetary Fund upgraded its economic forecast for 2010. The bank raised its forecast for 2010 growth to 2.5 percent, compared with its previous forecast of 1.9 percent.

But the IMF also lowered its global economic forecast for this year. It forecast that the world economy will contract 1.4 percent, compared with the previous forecast of 1.3 percent. In the United States, economic output should stabilize in the second half of this year and gradually recover in 2010.

"The good news is that the forces pulling the economy down are decreasing in intensity," Olivier Blanchard, the IMF's chief economist, said in a statement. "The bad news is that the forces pulling the economy up are still weak."

Meanwhile, crude oil prices fell more than 4 percent, or $2.79, to settle at $60.14 a barrel on the New York Mercantile Exchange. After rising to more than $70 a barrel last month, prices have fallen amid concerns about the global economy. That weighed on energy stocks, including Exxon Mobil and ConocoPhillips, which fell 0.5 percent and 1.4 percent, respectively. Chevron rose 0.1 percent.