U.S. Stocks Little Changed in Choppy Trade

By Saumya Vaishampayan 

The Dow industrials were little changed in choppy trade Wednesday afternoon amid mixed corporate earnings news and as investors looked ahead to the European Central Bank's policy-setting meeting.

Reports that the ECB was considering a new stimulus package that largely met investor expectations gave stocks a boost earlier in the session. Investors are now looking to see if the ECB will decide to take a more aggressive stance at Thursday's meeting.

Also giving support to stocks was a rise in oil prices, traders said.

The Dow Jones Industrial Average fell four points to 17511. The Dow has traded in an intraday range of about 204 points.

The Nasdaq Composite Index added two points, or 0.1%, to 4657. The S&P 500 added four points, or 0.2%, to 2027.

IBM reported further declines in quarterly profit and revenue, and issued a profit forecast that fell below Wall Street's expectations. Shares fell 3.1%, leading the Dow lower.

UnitedHealth said earnings rose 5.8% in its December quarter, beating expectations. Shares gained 2.7%, up the most on the Dow.

Stocks opened lower and quickly turned higher in morning trade after reports suggested the ECB was set to deliver a bond-buying program that matched investors' expectations.

Wednesday's swings in stocks are in line with recent market action. Volatility has picked up across asset classes, with the CBOE Volatility Index trading near its 10-year average of 20. The VIX's average for 2014 was just 14.2.

"We get all worked up about a 100-point move in the Dow these days because in the last five years we've had a calm, complacent market," said Viren Chandrasoma, managing director of equity trading at Credit Suisse Group AG. "In the last few months, you've seen not crazy volatility but more of a return to normal," he added.

A proposal from the ECB's executive board calls for bond purchases of about EUR50 billion ($58 billion) a month that would last for a minimum of one year, The Wall Street Journal reported. The proposal suggests bond purchases could amount to at least EUR600 billion, in line with forecasts that have recently centered on a figure of around EUR500 billion or higher.

Justin Wiggs, a trader at Stifel Nicolaus, said there was a significant amount of interest in buying stocks after the ECB headlines hit this morning. "We've seen a massive reversal today," he said, referring to the swings in stocks.

Easy monetary policy has helped drive gains in U.S. stocks in recent years. Even as the Federal Reserve remains on track to raise interest rates this year, efforts from other major central banks, including the ECB, are likely to keep global interest rates low. And that should continue to lift U.S. stocks, said Aaron Jett, vice president of global equity research at Bel Air Investment Advisors.

By buying bonds, the ECB is effectively saying it "wants investors to take more risk and move into stocks," he said. "The U.S. right now is the growth engine of the global economy," he added, which means it will continue to attract foreign investors.

Investors also eyed a rebound in oil prices. Crude-oil futures added 2.2% to $47.51 a barrel, boosting shares of energy companies. Energy stocks rose the most on the S&P 500, up 1.1%.

Oil prices have tumbled in recent months, one of the factors at play as companies report fourth-quarter earnings. Companies have also faced dollar strength and weak economic growth abroad. Going into the fourth-quarter earnings season, analysts surveyed by FactSet had expected earnings growth of 1.1%, the weakest since the third quarter of 2012. Early indications don't look rosy: factoring in 51 companies that have already reported, the S&P 500 is on track to post earnings growth of just 0.36% from a year ago.

"Oil is probably the biggest story," said Bill Stone, chief investment strategist at PNC Wealth Management. "I know that energy earnings are going to be bad. The other side is, do any of the good [effects] of lower oil start showing up?" Mr. Stone noted that Delta Air Lines Inc.'s better-than-expected fourth-quarter results were helped in part by savings on jet fuel.

In other earnings news, Netflix shares surged 18%.

The company said it added 4.3 million streaming customers as foreign markets grew faster than expected, beating its forecast of 4 million.

European stocks closed sharply higher, with Germany's Dax notching a fresh record. The Stoxx Europe 600 rose 0.6% to end at a seven-year high.

Demand for haven assets ebbed. Gold futures lost 0.5% to $1287.60 an ounce. The yield on the 10-year Treasury note rose to 1.833% from 1.806% on Tuesday. Yields rise as prices fall.

Write to Saumya Vaishampayan at [e-mail]

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