Stocks wobble as earnings rally slows
NEW YORK: After two weeks of strong earnings pumped up the U.S. markets, weak results from Pfizer and others deflated a broad earnings rally, at least for today.
The world's largest drug maker posted lower than expected quarterly results Tuesday, slowing a parade of positive corporate reports. Clorox,Molson Coors Brewing Co., and Beazer Homes also slipped after announcing weaker earnings.
That sent broad indexes such as the Standard & Poor's 500 lower.
The Russell 2000, an index of small companies, lost 1.3 percent.
The S&P 500 fell 4.60 points, or 0.3 percent, to 1,356.62.
The Nasdaq composite fell 22.46, or 0.8 percent, at 2,841.62.
The Dow Jones industrial average inched out a gain of 0.15 percent to close at 12,807.51.
Randy Bateman, chief investment officer and president of Huntington Asset Advisors, said some kind of weakness was natural following a mostly positive earnings season. About 65 percent of companies in the S&P 500 have reported their results, and earnings are up about 21 percent from the same period last year, according to FactSet.
"We've had such a strong, hard run for the entirety of the year in the face of an awful lot of adversity," Bateman said. "Investors are going to sit back a little bit and say, 'How much more good news is out there?'"
Pfizer Inc. fared worst in the Dow Jones industrial average Tuesday, losing nearly 3 percent after the company reduced its revenue forecast for 2011.
Clorox Co. fell 3.6 percent and Molson Coors Brewing Co. fell nearly 6 percent after each reported lower net income compared to the same period last year. The consumer goods maker and beverage company both blamed higher costs for raw materials for the decline.
Beazer Homes USA Inc. slipped 5 percent. The homebuilder reported a larger-than-expected loss because orders for new homes fell, reflecting continued weakness in the housing industry.
The losses came after a string of stronger than expected earnings reports pushed the broad stock market up 2 percent this quarter. The Dow Jones industrial average gained 2.4 percent last week alone.
"You get a nice move like that and you're bound to have a pullback," said Bill Stone, chief investment strategist at PNC Asset Management. Investors sold stocks based on their perceived riskiness, he said, with the stable companies in the Dow losing the least and smaller, riskier companies in the Russell 2000 declining the most.
Not every company had poor results. MetroPCS Communications Inc. rose 10 percent, the most of any company in the S&P 500, after it added a record number of subscribers in the first quarter. The company sells low-cost phone service, primarily in cities.
General Motors rose 2.5 percent after its U.S. car and truck sales jumped 26 percent in April. Higher gas prices motivated consumers to buy more fuel-efficient vehicles.
Bond prices rose slightly. The yield on the 10-year Treasury note dipped to 3.26 from 3.28 percent from late Monday.
Two stocks fell for every one that rose on the New York Stock Exchange. Consolidated volume came to 4.5 billion shares.
From London AP reported that global stocks mostly slipped Tuesday as investors fretted about potential terrorist attacks following the death of Osama bin Laden and higher interest rates after India's central bank lifted borrowing costs again to fight inflation.
The retreat in markets confirmed that any early euphoria surrounding the death of the al-Qaida leader has run its course as investors focus on a raft of key economic news, including monthly U.S. jobs figures and the latest policy statement from the European Central Bank.
"Some concern about a potential retaliatory terrorist attack in the wake of bin Laden's death and policy tightening in emerging markets is weighing on market sentiment," said Benjamin Reitzes, an analyst at BMO Capital Markets.
In Europe, Germany's DAX closed 0.4 percent lower at 7,500.70 though the FTSE 100 index of leading British shares ended up 0.2 percent at 6,082.88.
The CAC-40 in France was 0.3 percent lower at 4,096.84.
In Europe, investors will be keeping a close watch on interest rate decisions from the European Central Bank and the Bank of England. Neither is expected to change interest rates, though the ECB is expected to indicate Thursday that it will follow April's first interest rate increase in nearly three years with another rise in June.
That belief has bolstered the euro currency over the past couple of months despite ongoing debt problems, most notably in Greece, Ireland and Portugal. While the ECB is poised to raise interest rates again in the coming months, the U.S. Federal Reserve has shown few signs it's ready to lift its super-low interest rates. That's added to the dollar's recent weakness against the euro.
Interest rates were in focus in Asia earlier after India's central bank raised its key interest rate by half a percentage point, warning that persistent inflation has become a threat to growth in Asia's third-largest economy.
India's reserve bank, which has raised borrowing costs nine times in just over a year, warned that economic growth would slow to about 8 percent this year while inflation would remain close to 9 percent for the first half of the fiscal year.
Unsurprisingly India's Sensex fell 2.4 percent.
Bucking the trend in Asia, mainland Chinese shares rose after markets reopened following Monday's May Day holiday.
The Shanghai Composite Index gained 0.7 percent to close at 2,932.19, while the Shenzhen Composite Index rose 1.1 percent to end at 1,214.12.
In Australia, a widely expected decision by the central bank to hold its key interest rate at 4.75 percent failed to boost stocks as Reserve Bank of Australia Governor Glenn Stevens warned that recent flooding and a cyclone was likely to have shrunk the Australian economy during the three months through March this year.
Australia's main S&P/ASX 200 fell 0.8 percent to close at 4,784.60.
Elsewhere in Asia, South Korea's Kospi tumbled 1.3 percent to close at 2,200.73 while Hong Kong's Hang Seng Index fell 0.4 percent to end at 23,633.25 - AP
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