The stock market initially rose sharply in light of generally favorable earnings from Caterpillar and 3M but gave up those gains in afternoon trading. News of weaker-than-forecast new home sales that fell for the first time in four months dampened hopes that the housing market may have hit bottom. Just after 2 p.m. EST, the Dow Jones Industrials (INDEX: ^DJI) were down just two points to 12,755, while the S&P 500 fell six points to 1,320.

Beyond the earnings scene, Home Depot (NYSE: HD) fell almost 1.5%, due largely to the bad housing news. Only 302,000 new homes were sold in 2011, down 6% from 2010 levels and the lowest number since government data began tracking figures in 1963.

Wal-Mart (NYSE: WMT) stock also fell, losing about 1%. The world's biggest retailer faces the potential for greatly increased competition from J.C. Penney (NYSE: JCP), which jumped sharply by about 11% on hopes that the turnaround led by new CEO Ron Johnson will be successful. With a combination of price cuts, store overhauls, and pushing further into the discount arena, J.C. Penney is definitely getting into Wal-Mart's traditional turf.

On the upside, Johnson & Johnson (NYSE: JNJ) saw modest gains, following through on yesterday's small advance in the aftermath of its quarterly earnings release. The company returned to revenue growth with a 5.6% jump in 2011 sales, but all of that came from international markets. If the dollar remains strong, then currency headwinds could continue to play a role in holding J&J back.

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