U.S. Stocks Fall as S&P 500 Slumps for Third Day on Earnings
July 29, 2010, 5:08 PM EDTBy Rita Nazareth
July 29 (Bloomberg) -- U.S. stocks fell, sending the Standard & Poor’s 500 Index lower for a third day, as earnings and forecasts that disappointed investors at technology and consumer companies wiped out an early advance.
Symantec Corp. and Nvidia Corp. lost at least 9.9 percent after reporting forecasts, while Akamai Technologies Inc. slid 13 percent after saying its profit margin shrank. Colgate- Palmolive Co. sank 6.8 percent as sales trailed estimates. Goldman Sachs Group Inc. rose 3.7 percent after saying the industry’s regulatory overhaul won’t cause “significant” reduction in revenue, according to Bank of America Corp.
The S&P 500 fell 0.4 percent to 1,101.53 at 4 p.m. in New York. The index was unable to remain above its average price of the last 200 days of about 1,114. The Dow Jones Industrial Average slipped 30.72 points, or 0.3 percent, to 10,467.16.
“The picture remains mixed,” said Keith Wirtz, who oversees $18 billion as chief investment officer at Fifth Third Asset Management Inc. in Cincinnati. “We’ll probably see this give and take during the summer because the liquidity is not normal. The employment conditions remain challenging. Good earnings results are not helping stock prices much. However, when you have bad numbers, stocks get killed.”
The S&P 500 fell the previous two days after consumer confidence slumped more than forecast, orders for durable goods unexpectedly decreased and the Federal Reserve said economic growth slowed in some areas. The gauge has climbed 6.9 percent in July, headed for its best monthly advance in a year, after earnings topped estimates at about 77 percent of its companies that have reported second-quarter results so far.
Slower GDP Growth
A Commerce Department report tomorrow may show U.S. growth slowed to 2.6 percent in the second quarter, from 2.7 percent in the first, based on the median forecast of economists in a Bloomberg survey.
Akamai Technologies sank 13 percent to $38.35. The largest supplier of software to make websites and digital media load faster said its profit margin shrank as it added business from customers like Netflix Inc. at lower prices.
Symantec fell 11 percent to $13.03. The world’s largest maker of computer security software forecast second-quarter sales and profit that missed analysts’ estimates, citing weakness in the euro and “cautiousness” among customers.
Nvidia, LSI
Nvidia slumped 9.9 percent to $9.13. The second-largest maker of graphics chips lowered its second-quarter sales forecast to a range between $800 million to $820 million. That compares with a prediction of $950 million to $970 million given May 13. Analysts had projected sales of $944.7 million, according to the average from a Bloomberg survey.
LSI Corp. had the biggest decline in the S&P 500, falling 14 percent to $4.08. The maker of chips used in computer disk drives said third-quarter sales will be between $625 million and $655 million. That compares with the $694.9 million average of estimates compiled by Bloomberg.
Oracle Corp. fell 2.4 percent to $23.70 as the U.S. filed a complaint under the False Claims Act against the company and Oracle America Inc., alleging that it defrauded the U.S. on a General Services Administration software contract that was in effect from 1998 to 2006 and involved hundreds of millions of dollars in sales.
“Tech is not doing great and that’s enough to drag the index,” said Michael Mullaney, who manages $9 billion at Fiduciary Trust Co. in Boston. “We need to get a better economic picture in order to get a sustainable stocks rally. We need to get job creation and the consumer back on board.”
Colgate
Colgate-Palmolive led a gauge of consumer-staples stocks to the second-biggest decline among 10 industries in the S&P 500. The world’s largest toothpaste maker reported second-quarter sales of $3.81 billion, missing the average analyst estimate in a Bloomberg survey of $3.94 billion. Colgate slumped 6.8 percent to $78.12.
Visa Inc. declined 4.3 percent to $71.98. The Department of Justice has indicated that it is considering filing a civil lawsuit over a policy that bars merchants from charging extra to customers who pay with credit cards.
“The department has indicated that it is considering, Chief Executive Officer Joseph W. Saunders said yesterday in a conference call with analysts after San Francisco-based Visa reported fiscal third-quarter results.
Utility companies had the biggest decline in the S&P 500 among 10 industry groups, falling 1.6 percent.
Constellation Energy Group Inc. fell 4.6 percent to $31.75. Jefferies & Co. lowered its 2010 earnings estimate for the supplier of electricity and natural gas.
Rates
Federal Reserve Bank of St. Louis President James Bullard said the central bank should resume purchases of Treasury securities if the economy slows and prices fall rather than maintain a pledge to keep rates near zero. Bullard, a voting member of the Federal Open Market Committee this year, said using Fed communications to pledge rates will stay near zero may prove to be detrimental.
U.S. and Japanese stocks were cut and European shares were raised by UBS AG global strategists, who said there is less risk and economic data is more supportive in Europe. U.S. shares were cut to “neutral” and Japanese equities were lowered to “underweight,” according to a report by strategist Jeffrey Palma to clients dated July 28. Both regions were previously rated “overweight.”
Stocks rose earlier today after the Labor Department reported that the number of Americans filing first-time claims for unemployment insurance fell to 457,000 last week, less than the median estimate in a Bloomberg survey of economists.
‘Very Slowly’
“The economy is recovering very slowly even as profits rebound very fast,” said David Kelly, who helps oversee $445 billion as chief market strategist for JPMorgan Funds in New York. “Today’s jobless claims were slightly better-than- expected, but I don’t think it really changes the story. The employment rebound is still slow.”
Goldman Sachs rose 3.7 percent to $152.58. The impact of the financial reform will be minimal unless market-making rules “turn out to be draconian (which they believe is unlikely),” Bank of America Corp. analyst Guy Moszkowski wrote in a report sent to clients today, citing a meeting with Goldman Sachs President Gary Cohn and Chief Financial Officer David Viniar. The company “is not waiting for final rules to be formulated by regulators to decide where to invest and how to grow.”
Citrix Systems Inc. surged 20 percent, the biggest gain in the S&P 500, to $56.67. The maker of networking software was raised to “outperform” from “neutral” at Robert Baird & Co. and to “neutral” from “underperform” at Cowen & Co.
Cisco Systems Inc. stock was halted for five minutes following a 100-share trade on NYSE Amex that drove the shares up more than 10 percent, triggering a circuit breaker implemented after the May 6 market crash. Cisco fell 0.8 percent to $23.21.
--With assistance from Sarah Jones in London. Editors: Michael P. Regan, Joanna Ossinger
To contact the reporter on this story: Rita Nazareth in New York at rnazareth@bloomberg.net;
To contact the editor responsible for this story: Nick Baker at nbaker7@bloomberg.net.
