Wall St rises on earnings and economic data

US stocks advanced again on Tuesday as some better-than-expected corporate earnings and a surprising jump in durable goods orders helped boost beaten-down sentiment on Wall Street.

However, as the Federal Reserve Open Market Committee convened for its two-day meeting there was some more worrying news for the US consumer as house prices slumped by a record amount and consumer confidence took another knock.

Traders found strength in telecoms, materials and utilities stocks but retailers and some technology companies were sold as skittish investors awaited the Fed's decision on interest rates due on Wednesday.

At midday the S&P 500 was up 0.5 per cent at 1,361.71, the Dow Jones Industrial Average gained 0.7 per cent to 12,464.45 while the Nasdaq Composite climbed only 0.2 per cent to 2,353.35.

Many analysts remain cautious on the near term outlook for stocks with volatility remaining elevated amid fears of a US recession, further write-downs in the financial sector and continued uncertainty surrounding bond insurers.

"We are still to be convinced that the strategic case for equities has improved sufficiently," said David Shairp, global strategist at JPMorgan Asset Management. In order to make a stronger case Mr Shairp said the market needs to see that "central banks ease, the banking system recapitalises itself, equity valuations are compelling and technical indicators are supportive."

But others have pointed to signs of improvement in the equities environment in recent trading with the S&P avoiding late-session sell-offs in three of the last four trading days.

"The market has shown a little bit of stability over the last few sessions," Richard Sparks, senior equities analyst at Schaeffer's Investment Research, said. "The Fed holds a big wild card - they have the power to make or break the market."

In spite of enacting an unprecedented 75bp cut last week, the Fed is expected to continue easing rates today with the futures market pricing in a 74 per cent likelihood of a 50bp cut. Traders have warned that any deviation from this line could spark another sell-off in equity markets.

Tuesday's economic news was dominated by a larger-than-expected rise in durable goods orders, which provided solace to investors fearing a manufacturing slump. Orders for big ticket items rose 5.2 per cent in December, well above a forecast gain of 2.1 per cent.

Among Dow components benefiting from the improved outlook were Boeing (NYSE:BA), up 2.5 per cent at $79.50 and Caterpillar (NYSE:CAT), up 1.8 per cent at $69.42.

""There is no doubting the strength of the December data, but there is plenty of doubting how sustainable this is, and what this says about future trends," Alan Ruskin, chief international strategist at RBS Greenwich Capital, said.

There was little sign of optimism for US consumers after the S&P/Case-Shiller 10-city home price Index fell a record 8.4 per cent in the year through November, an 11th straight monthly decline. Meanwhile the latest reading of the Conference Board's U.S. consumer confidence index fell to 87.9 in January from an upwardly revised 90.6 in December.

Earnings news was more upbeat, with 20 of 26 S&P 500 companies reporting results on Tuesday beating estimates.

One of the exceptions was Countrywide Financial (NYSE:CFC) which posted a wider-than-expected $422m loss after the mortgage lender set aside $924m to cover rising loan losses. In spite of the loss the beaten down shares rose 4.2 per cent to $6.20 after its chief executive said a takeover by Bank of America was a "go".

Also in the financial sector, American Express (NYSE:AXP), up 1.1 per cent to $47.94, posted a 10 per cent decline in net income as it set aside $438m charge to cover bad loans.

In industrials Dow Chemical (NYSE:DOW) said fourth quarter earnings fell by more than half to $472m as agricultural and energy costs rose sharply. However, the results beat estimates and the shares rose 2.3 per cent to $38.45. Meanwhile,3M (NYSE:MMM)'s adjusted profit also exceeded Wall Street's expectations and the shares added 0.8 per cent to $78.05.

Technology was among the weakest sectors on Tuesday after VMWare, the virtualization software firm, missed Wall Street's revenue target causing the shares to plunge 30.7 per cent to $57.54. However,Lexmark (NYSE:LXK) cheered investors with its fiscal first quarter outlook and the printer maker's shares shot up 14.3 per cent to $33.53. Yahoo fell 1 per cent to $20.57 ahead of its quarterly results, due after the closing bell.

Clear Channel Communications (NYSE:CCU), the radio station operator, continued to fall amid fears a buyout deal could fall apart. The shares gave up 4.6 per cent to $29.97 and have fallen 11.3 per cent in the last two sessions.