IBM, Coke earnings lift US stock indexes

NEW YORK (AP) — Strong profits from Coca-Cola, IBM and other companies drove a stock market rebound Tuesday.

The Dow Jones industrial average gained 104 points, or 8 percent, to 12,489 in early afternoon trading. The Dow slid five of the previous seven days as Europe's debt crisis threatened to envelop Italy and as a deadlock continued in Washington over raising the country's borrowing limit.

The S&P 500 index rose 10 points or 0.8 percent, to 1,315. The Nasdaq composite gained 41 points or 1.5 percent, to 2,806.

The gains pushed the Dow and Nasdaq higher for the month. The S&P 500 is still down by less than 1 percent.

Information technology stocks led industry groups higher after IBM Corp.'s results beat analysts' estimates. Corporate software spending held steady during the quarter. IBM's stock rose 4 percent.

Coca-Cola Co.'s income rose 18 percent in the second quarter on stronger sales overseas. The world's largest beverage maker raised some prices to offset higher ingredient costs. Coca-Cola's stock was up more than 3 percent.

KeyCorp rose more than 1 percent after the Cleveland-based banking company reported a jump in earnings thanks to a drop in loan losses. Net income of 25 cents a share was up from 3 cents a share a year ago.

Harley-Davidson Inc. rose 10 percent, the most of any stock in the S&P 500 index. The motorcycle maker reported its first increase in U.S. sales since the final quarter of 2006. Sales of its motorcycles, some of which sell for more than $30,000, had languished throughout the economic slump.

A jump in housing construction lifted the stocks of Lennar Corp. and D.R. Horton Inc. The Commerce Department said building of new houses and apartments jumped 14.6 percent in June from the previous month. Single-family house construction rose 9.4 percent, the largest increase since June 2009, the month that marked the end of the recession. Much of the monthly increase, however, came from new apartment buildings.

Bank stocks were mixed. Wells Fargo & Co.'s profit soared 30 percent to 70 cents per share on stronger results from lending. Uncollected loans dropped for the sixth quarter in a row. The bank's stock gained 4 percent.

Bank of America Corp. and Goldman Sachs Group Inc. fell more than 2 percent after posting disappointing results.

Bank of America lost 90 cents per share. That's more than analysts polled by data provider FactSet expected. The loss included a $8.5 billion settlement the bank paid to mortgage-bond investors.

Goldman's earnings more than doubled to $1.85 per share, up from 78 cents a year ago. But a drop in bond trading kept results from hitting the analysts' estimates of $2.35 per share.

Europe's banking troubles and the impasse over lifting the U.S. government's borrowing limit pummeled the stock market Monday. The Dow fell 95 points.

Two weeks are left before the Treasury Department says the government must lift the country's $14.3 trillion borrowing limit or risk defaulting on its obligations. House Republicans are preparing to vote on a plan that would lift the debt ceiling but also slash spending. The proposal includes a balanced-budget amendment to the U.S. Constitution. President Barack Obama pledged to veto the bill.

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Flat jobs data signal weakest recovery in decades

WASHINGTON (AP) -- The job market is defying history.
A dismal June employment report shows that employers are adding nowhere near as many jobs as they normally do this long after a recession has ended.
Unemployment has climbed for three straight months and is now at 9.2 percent. There's no precedent, in data going back to 1948, for such a high rate two years into what economists say is a recovery.
The economy added just 18,000 jobs in June. That's a fraction of the 90,000 jobs economists had expected and a sliver of the 300,000 jobs needed each month to shrink unemployment significantly.
The excruciatingly slow growth is confounding economists, spooking consumers and dismaying job seekers. Friday's report forced analysts to re-examine their assumption that the economy would strengthen in the second half of 2011.
They had expected improvement in June after a bleak jobs report for May. They figured that hiring in May had been artificially weakened by temporary factors -- a run-up in gasoline prices to $4 a gallon and factory disruptions caused by Japan's earthquake and nuclear crisis.
But the June numbers were even worse than May's, even though gasoline prices are falling and factories revving up again.
"This is a remarkable, across-the-board backslide," says economist Heidi Shierholz of the Economic Policy Institute.
Sometimes disappointing economic reports look better on closer inspection. This one gets uglier.
Workers' hourly pay fell in June. They worked fewer hours. And 16.2 percent of those who wanted to work were either unemployed, forced to settle for part-time jobs or had given up looking for work. That figure was up from 15.8 percent in May.
Among the frustrated is Cris Cohen, who was laid off in April from a job as a contractor for Cisco Systems in Raleigh, N.C. He's been searching for work since then, futilely combing job listings, reaching out to friends and setting up a website with a resume and a blog.
"In the past when I've left jobs or been laid off, I've just contacted connections I have had, and that's led to opportunities," says Cohen, who has a wife and a 9-year-old son. "Now it's just seems much more dry.... There's just always that anxious feeling, that nausea."
One problem is that after slashing jobs during the Great Recession, employers are still reluctant to replace them. They've learned to squeeze more work and revenue out of reduced staffs. Productivity and corporate profits have soared. But companies don't want to add workers until they're confident that consumers are spending enough to support higher sales.
Other factors are restraining hiring, too. More sophisticated software lets managers scrutinize changes in their businesses minute-by-minute. They can postpone hiring until they're certain they need more workers.
Employers have good reason to wait, says economist Ken Mayland at ClearView Economics. A political standoff over the federal debt limit threatens to send the U.S. government into default next month. That would send interest rates soaring and might tip the economy back into recession.
Even if President Barack Obama and congressional Republicans agree to raise the borrowing limit, the deal will likely require deep cuts in government spending and possibly tax increases. Combined, those steps could slow the economy further.
The economy has already lost 493,000 government jobs since the recession ended, most of them eliminated by cash-short cities and counties. Now it faces the prospect of big cuts by the federal government, too.
Heightening the uncertainty are Europe's debt crisis and the possibility that China's efforts to tame inflation will slow its booming economy. Both factors could destabilize financial markets and reduce U.S. exports, one of the economy's few strengths.
"Why would an employer hire now?" Mayland says. "It's hunker down and wait and see."
The Federal Reserve has already lowered short-term interest rates to near zero. And last month, it ended a Treasury bond-purchase program that was intended to strengthen the economy.
Congress, pointing to high budget deficits, won't consider spending taxpayer money to jolt the economy with new government programs.
"We have painted ourselves into a corner," Mayland says. "When you're at zero interest rates and running a $1.5 trillion deficit, you don't really have many policy options."
Many analysts say the economy mainly needs time to recover from an implosion of the real estate market and a devastating financial crisis.
Normally, housing and construction would fuel a recovery. Lower interest rates would draw homebuyers into the market. Increased demand would encourage builders to hire construction workers and put up new houses.
Not so this time. Home prices are continuing to fall as banks dump foreclosed homes on the market. People's home equity has shrunk.
The tepid recovery is taking a toll on consumers, whose spending accounts for 70 percent of economic activity. The Conference Board business group said last week that its consumer confidence index fell to 58.5 in June. A healthy reading is 90. At this point after the previous three recessions, the index averaged 87.
The low reading suggests consumers will be wary about spending. That could leave businesses even more cautious about hiring.
Businesses are nervous about the economic outlook now that the Fed and Congress seem to have ended their efforts to stimulate growth, says David Rosenberg, chief economist at Gluskin Sheff + Associates.
"The policy cupboard is pretty bare, and we can see what the emperor looks like disrobed," Rosenberg says. "It's not a pretty picture."
AP Business Writers Christopher S. Rugaber and Derek Kravitz in Washington contributed to this report