MarketView for April 15

Summary

The equity markets ended a volatile session on Tuesday, but one that ended on a positive note, lifted by gains in such blue-chip names as Coca-Cola and Johnson & Johnson, though persistent weakness in momentum names limited the Nasdaq's advance.

Coke and J&J, both Dow Jones Industrial Average components, climbed after their results while recent outperformers fell, a sign that investors were rotating from growth stocks into value ones. In recent weeks, high-growth stocks have been under pressure after a meteoric rise in their prices took valuations to unsustainable levels.

The three major equity indexes fell for much of the session before rebounding in afternoon trading. The Nasdaq moved in a 108 point range, and at its lows of the day, it was within 0.3 percent of 3,934.53, the level that represents a 10 percent drop from its recent intraday peak, hit on March 6.

Coca-Cola rose 3.7 percent to $40.18 as one of the S&P 500's largest gainers after the company reported better-than-expected quarterly revenue, helped by strong sales in China. Johnson & Johnson rose 2.1 percent to $99.20 after posting earnings that exceeded Street expectations while at the same time raising its  full-year earnings outlook.

Among the most active "momentum" names, shares of Tesla Motors fell 2.1 percent to $193.91 while Netflix was down 1.6 percent on the day to $326.27. Intuitive Surgical fell 1.9 percent to $417.09.

After the closing bell, Intel rose 3 percent to $27.56 in extended-hours trading after reporting first-quarter results. Yahoo rose 1.4 percent to $34.70 after the bell following the company's results.

In the latest economic snapshot, a gauge of manufacturing in New York state grew at a much slower rate in April than it did in March, coming in far below expectations.

The Consumer Price Index increased 0.2 percent in March as food and housing rental costs rose, although inflation pressures remained generally benign.

S&P 500 companies' first-quarter earnings are projected to have increased just 1 percent from a year ago, Thomson Reuters data showed. The forecast is down sharply from the start of the year, when profit growth was estimated at 6.5 percent.

Twitter rose 11.4 percent to close at $45.52 after the company said it bought social data provider Gnip for an undisclosed amount.

Aaron's fell 4 percent to end the day at $29.25 after the rent-to-own furniture and electronics retailer said it had rejected a $2.3 billion takeover offer from a major shareholder and instead acquired a retail credit financing firm for about $700 million.

Zebra Technologies said it would buy Motorola Solutions' enterprise business, which makes rugged mobile computers, tablets and barcode scanners, for $3.45 billion in cash. Motorola Solutions shares fell 0.6 percent to end the day at $63.37. Zebra shares closed down 10.1 percent at $61.39.

Approximately 7.62 billion shares changed hands on the major equity exchanges according to BATS exchange data, a number that was above the month-to-date average of 6.87 billion shares.

CPI Rises

Consumer prices were a bit higher in March, as food and housing rental costs rose in a possible sign that a disinflationary trend had run its course. The increase should allay concerns among some Federal Reserve officials that inflation was running too low, although the rise was mild enough to suggest the central bank could keep benchmark interest rates near zero for quite some time.

The Labor Department reported Tuesday morning that its Consumer Price Index increased 0.2 percent in March after gaining 0.1 percent in February. Shelter and food accounted for most of the rise, which exceeded Street expectations for a 0.1 percent advance.

While prices for many items tend to swing from month to month, housing costs generally follow a steadier path.

The so-called core CPI, which strips out volatile energy and food components, also rose 0.2 percent. In the 12 months through March, consumer prices increased 1.5 percent, accelerating from a 1.1 percent rise in February. The core CPI advanced 1.7 percent, up from 1.6 percent.

The Fed targets 2 percent inflation and it tracks an index that is running even lower than the CPI. But with domestic demand picking up and the labor market slowly tightening, inflation is expected to drift back toward its target this year.

With inflation stirring, consumers felt a bit of a pinch last month. Separate data from the Labor Department showed average hourly earnings fell in March when adjusted for prices.

Despite firming domestic demand, housing is struggling and manufacturing activity continues to be lackluster.

Another report on Tuesday showed confidence among homebuilders remained dour in April. The NAHB/Wells Fargo Housing Market index rose only a point to 47. Readings below 50 mean more builders view market conditions as poor than favorable, and April's reading was the third in a row below that threshold.

In another report, the New York Fed said its "Empire State" general business conditions index fell to a five-month low of 1.29 in April from 5.61 in March. Economists had expected a reading of 8.0 for the period. The gauge of New York state manufacturing was pulled down by a plunge in new orders.

Despite the slump, manufacturers managed to push through price increases. However, they were not too optimistic they would be able to continue raising prices over the next six months.

Last month, consumer prices were bumped up by the second consecutive 0.4 percent rise in food prices. A drought in the western United States has pushed up prices for meat, dairy, fruit and vegetables. Gasoline prices fell for a third straight month.

Shelter costs increased 0.3 percent, accounting for almost two-thirds of the rise in the core CPI index. The largest component of shelter costs - so-called owners' equivalent rent - also rose 0.3 percent last month.

That component is now up 2.6 percent from a year-ago, the largest 12-month gain since July 2008, reflecting rising demand for rental apartments as high house prices and firmer borrowing costs sideline potential homeowners.