Bloomberg News

U.S. Stocks Fall on Earnings as Investors Weigh Data

January 31, 2013

U.S. stocks fell, trimming the best January rally for the Dow Jones Industrial Average since 1994, on disappointing earnings as investors weighed economic data ahead of tomorrow’s jobs report.

United Parcel Service Inc. fell 2.4 percent after it forecast profit that trailed estimates as a weak global economy weighs on demand for package shipments. Dow Chemical Co. slid 7 percent after earnings missed forecasts as sales fell in Europe. ConocoPhillips slipped 5.1 percent after saying oil and natural gas production will hit a low point this year. Qualcomm Inc. and JDS Uniphase Corp. rallied 3.9 percent and 17 percent, respectively, amid better-than-anticipated earnings.

The Standard & Poor’s 500 Index fell 0.3 percent to 1,498.11 at 4 p.m. in New York. The Dow lost 49.84 points, or 0.4 percent, to 13,860.58. About 7.1 billion shares traded hands on U.S. exchanges today, or 16 percent above the three-month average.

“The market’s due for a breather, so unless the economic news was significantly above expectations or significantly below, you’re probably going to get a trading down market,” Eric Green, director of research at Penn Capital, which oversees about $7 billion in Philadelphia, said in a phone interview. “The mixed data give some reason to take some profits potentially.”

The S&P 500 rose 5 percent this month, its best January performance since 1997, as lawmakers agreed on a budget compromise and companies reported better-than-estimated earnings. The Dow rallied 5.8 percent, the biggest January gain since 1994.

Record Highs

The benchmark index is about 4.3 percent below its record of 1,565.15 set in October 2007, while the Dow is about 2.2 percent from its all-time high. The S&P 500 has more than doubled from a 12-year low in 2009 as the Federal Reserve increased its bond purchases to keep interest rates low and spur growth.

U.S. benchmark indexes fell from five-year highs yesterday as the economy unexpectedly shrank in the fourth quarter. Economic reports today showed that consumer spending in the U.S. climbed in December as incomes grew by the most in eight years, while claims for unemployment benefits increased more than forecast last week.

Data tomorrow may show employers added 165,000 workers this month, according to economists’ projections in a Bloomberg survey. The unemployment rate probably held at 7.8 percent.

Benign Outlook

“The outlook is fairly benign right now,” Brian Gendreau, a market strategist at Los Angeles-based Cetera Financial Group Inc., said by phone. The firm has about $20 billion in assets under management. “We are looking at moderate growth. Earnings picture is good. No one is talking about double-dip recession.”

Dow Chemical and UPS are among 37 companies in the S&P 500 scheduled to report earnings today. About 74 percent of the 237 companies that have released results so far exceeded profit projections, and 66 percent have surpassed sales estimates, according to data compiled by Bloomberg.

Seven out of the 10 groups in the S&P 500 fell as consumer- discretionary, energy and raw-material shares declined the most, sinking at least 0.5 percent. Utilities, technology and phone companies rose the most.

UPS, Dow

UPS slid 2.4 percent to $79.29. Earnings per share for this year will be $4.80 to $5.06, the Atlanta-based company said. Analysts projected $5.13, the average of estimates in a Bloomberg survey.

The company’s growth is constrained by a sluggish worldwide economy and disputes over the U.S. debt ceiling that erode shipping demand and confidence, Chief Executive Officer Scott Davis said. Investors and analysts use the company as an economic gauge because it handles goods as varied as auto parts and pharmaceuticals.

Dow Chemical tumbled 7 percent, the most since September 2011, to $32.20. The largest U.S. chemical maker by sales reported a net loss of 61 cents a share. Profit excluding one- time items was 33 cents a share, trailing the 34-cent average of estimates compiled by Bloomberg.

ConocoPhillips (COP:US) slipped 5.1 percent, the biggest drop since August 2011, to $58. Daily output from continuing operations may decline to as little as 1.475 million barrels of oil equivalent in 2013 because of asset sales that are part of its restructuring, the company said.

Time Warner Cable Inc. tumbled 11 percent to $89.34. The second-largest U.S. cable-television operator forecast full-year profits short of analyst estimates.

Audio Equipment

Harman International Industries Inc. slumped 9.1 percent to $44.78. The maker of audio equipment for cars and homes forecast 2013 operating profit of $2.90 a share at most. That missed the average analyst estimate of $3.36.

Constellation Brands Inc., which has agreed to buy out partner Grupo Modelo SAB from its U.S. beer importing business, sank 17 percent to $32.36. The U.S. sued to block Anheuser-Busch InBev NV’s proposed $20.1 billion purchase of the half of Grupo Modelo it doesn’t already own, saying the deal would hurt competition and raise prices. Constellation’s agreement was struck in part to help make InBev’s acquisition more palatable to U.S. regulators, people familiar with the discussions said in June.

Qualcomm (QCOM:US) rose 3.9 percent to $66.02. The largest seller of semiconductors for mobile phones gave a second-quarter sales and profit forecast that exceeded analysts’ estimates, helped by strong sales of smartphones that run on its technology.

JDS Uniphase

JDS Uniphase rallied 17 percent to $14.51. The maker of fiber-optic testing equipment reported second-quarter profit excluding some items of 18 cents a share, beating the average analyst estimate of 14 cents. Needham & Co. raised the stock’s rating to buy from hold.

Mead Johnson Nutrition Co. climbed 12 percent to $76. The world’s largest baby formula maker reported fourth-quarter earnings that exceeded analysts’ estimates.

Citrix Systems Inc. rallied 9.2 percent to $73.16. The software maker projected first-quarter revenue in the range of $670 million to $680 million. The average analyst estimate in a Bloomberg survey called for $669.2 million.

WMS Industries Inc. (WMS:US) surged 51 percent to $24.75. Scientific Games Corp. agreed to buy WMS for $1.5 billion, the biggest deal in the leisure and recreational-products industry in almost two years, to create a global supplier of lottery equipment and slot machines.

Whirlpool Corp. added 6.1 percent to $115.38. The world’s largest appliance maker reported better-than-estimated profits for the fourth quarter and forecast full-year earnings of $9.25 to $9.75 a share, exceeding the average analyst estimate of $9.09.

Investors should consider buying stocks related to homebuilding, including Whirlpool, according to Laszlo Birinyi, president of Birinyi Associates Inc. The company’s shares will rally this year, even after they more than doubled in 2012, he said during a Bloomberg Television interview today.

To contact the reporters on this story: Lu Wang in New York at lwang8@bloomberg.net; Sarah Pringle in New York at springle1@bloomberg.net

To contact the editors responsible for this story: Lynn Thomasson at lthomasson@bloomberg.net


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Companies Mentioned

  • COP
    (ConocoPhillips)
    • $79.97 USD
    • -0.67
    • -0.84%
  • QCOM
    (QUALCOMM Inc)
    • $76.44 USD
    • 0.61
    • 0.8%
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