Stocks edge higher; Avon, Michael Kors surge

Traders work on the floor of the New Traders work on the floor of the New York Stock Exchange. (Feb. 5, 2013) Photo Credit: Getty Images

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Stocks edged higher in early trading Tuesday following mixed earnings reports from companies including Avon, Goodyear and Coca-Cola.

The Dow Jones industrial average rose 31 points to 14,003 by 11:06 a.m. The Standard & Poor's 500 was up two points at 1,519. The Nasdaq was up one at 3,193.

Avon, a direct seller of beauty products, jumped $2.88, or 17 percent, to $20.17 after the company posted a fourth-quarter loss that wasn't as bad as analysts had expected. Avon hopes to save $400 million by slashing costs. Michael Kors, a luxury clothing and accessories seller, rose $6.22, or 11 percent, to $63.22 after reporting earnings that beat analysts' predictions.

Coca-Cola, the world's largest beverage company, fell 74 cents to $37.88 after reporting fourth-quarter revenue that fell short of analysts' forecasts. Goodyear Tire & Rubber sank 41 cents, or 3 percent to $13.50 after the company cut its forecast for full-year earnings, blaming weakness in the European economy.

About 70 percent of companies in the S&P 500 have reported earnings for the fourth quarter. Analysts are projecting that earnings will rise 6.4 percent for the period, an improvement from the 2.4 percent growth reported in the third quarter, according to S&P Capital IQ.

A start-of-the-year rally that pushed indexes close to record highs has slowed down. The S&P 500 is up 1.3 percent this month, following a 5 percent gain in January. The Dow has advanced 1 percent in February, after surging 5.8 percent a month earlier, logging its best January in almost two decades.

Investors may have become too optimistic about the outlook for stocks, said Uri Landesman, president of hedge fund Platinum Partners.

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"The market is priced for perfection," said Landesman. "The odds of a disappointment are very, very high." Landesman predicts that the S&P 500 will climb past its record and rise as high as 1,600 by April before then slumping as low as 1,300 as company earnings start to disappoint investors. The record close for the S&P 500 is 1,565, reached in October 2007.

Stock advanced at the start of the year after lawmakers reached a last-minute deal to avoid the "fiscal cliff" of sweeping tax increases and spending cuts.

Investors are also becoming more optimistic that the housing market is recovering and that hiring is picking up.

Investors will be watching closely Tuesday night when President Barack Obama delivers his annual State of the Union speech. Obama is expected to focus on the economy, including job creation.

A decline in bond prices since the beginning of the year has also slowed. The yield on the 10-year Treasury note, which moves inversely to its price, rose 3 basis points to 1.98 percent. The yield was 1.71 percent at the beginning of the year.

Among other stocks making big moves: -- Masco jumped $2.59, or 15 percent, to $20.37 after the home improvement and building products company reported earnings that beat analysts' expectations thanks to strong demand in North America.

-- Dun & Bradstreet, a provider of credit and business data, fell $5.63, or 7 percent, to $79.65 after the company reported that a fourth-quarter profit that came in below market expectations.

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