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Market flat on mixed earnings from Intel, Morgan Stanley

Brendan McDermid | Reuters
Brendan McDermid | Reuters
Traders work on the floor of the New York Stock Exchange, Jan. 18, 2013.
By Caroline Valetkevitch, Reuters

NEW YORK — U.S. stocks were little changed on Friday as a weak outlook from tech heavyweight Intel offset a better-than-expected quarterly profit at Morgan Stanley.

Still, the S&P 500 was on track for a third week in a row of gains and remained near a five-year high.

Shares of Intel Corp slumped 6.7 percent to $21.17 a day after it forecast quarterly revenue below analysts’ estimates and announced plans for increased capital spending amid slow demand for personal computers.

On a positive note, Morgan Stanley reported a fourth-quarter profit after a year-earlier loss, helped by higher revenue at the bank’s institutional securities business. Its stock jumped 7.5 percent to $22.32.

“Intel earnings weren’t that bad, although their revenue was weak. It sparks fears about not only the company but about the whole PC sector, and that’s pressuring the market today,” said Tim Ghriskey, chief investment officer of Solaris Group in Bedford Hills, New York.

Heading into a three-day weekend, investors were cautious about the chances for settling of major differences in Congress about government debt and spending. U.S. markets will be closed on Monday for the Martin Luther King Jr. holiday

“Governmental policy, or lack thereof, is again pushing forth this wait-and-see attitude on the part of investors. So the market is flat and with low volume and low volatilty because investors are waiting to see what happens with the debt ceiling and spending cuts,” said Bryant Evans, investment adviser and portfolio manager at Cozad Asset Management, in Champaign, Illinois.

There were signs that the question of raising the U.S. debt limit would be put off for a while. House Republican leaders said they would seek to pass a three-month extension of federal borrowing authority next week to buy time for the Democratic-controlled Senate to pass a budget that shrinks deficits.

Overall, S&P 500 fourth-quarter earnings rose an estimated 2.5 percent, according to Thomson Reuters data.

The Dow Jones industrial average was up 8.69 points, or 0.06 percent, at 13,604.71. The Standard & Poor’s 500 Index was up 0.17 points, or 0.01 percent, at 1,481.11. The Nasdaq Composite Index was down 8.61 points, or 0.27 percent, at 3,127.39.

On Thursday, the S&P 500 rose to its highest since late 2007, and that could prompt investors to lock in recent gains, analysts said.

Reflecting the complacency, the CBOE Volatility index , Wall Street’s so-called fear gauge, fell 7.4 percent. The VIX usually moves inversely to the S&P 500 as it is used as a hedge tool against further market decline.

Economic data from China provided some support to the market, though the focus remained on U.S. corporate earnings. The country’s economy grew at a modestly faster-than-expected 7.9 percent in the fourth quarter, the latest sign the world’s second-biggest economy was pulling out of a post-global financial crisis slowdown which saw it grow in 2012 at its weakest pace since 1999.

General Electric reported a better-than-expected rise in earnings, spurred by robust demand in China and oil-producing countries. Shares were up 3.2 percent at $21.99.

Despite the gains by Morgan Stanley, financial stocks sagged as Capital One Financial reported disappointing profit. Capital One slumped 7.7 percent to $56.87, while the KBW bank index slipped 0.9 percent.

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