Most U.S. Stocks Decline After Retreat in Consumer Confidence
July 27 (Bloomberg) -- Bloomberg's Courtney Donohoe reports on the performance of the U.S. equity market today. Most stocks fell, with the Standard & Poor’s 500 Index declining for the first time in four days, as retailers slid after consumer confidence retreated to a five-month low. Bloomberg's Pimm Fox also speaks. (Source: Bloomberg)
July 27 (Bloomberg) -- Mohamed El-Erian, chief executive officer at Pacific Investment Management Co., discusses the outlook for the global economy and financial markets. El-Erian talks with Tom Keene and Ken Prewitt on Bloomberg Radio's "Surveillance." (This report is an excerpt. Source: Bloomberg)
July 27 (Bloomberg) -- Joseph Quinlan, chief market strategist at U.S. Trust, Bank of America Private Wealth Management, and John Bougearel, director of research at Structural Logic, talk about the U.S. stock market and economy. They speak with Carol Massar and Matt Miller on Bloomberg Television's "Street Smart." Bloomberg's Adam Johnson, Julie Hyman, Zahra Burton and Dominic Chu also speak. (Source: Bloomberg)
Most U.S. stocks fell, with the Standard & Poor’s 500 Index declining for the first time in four days, as retailers slid after consumer confidence retreated to a five-month low.
Amazon.com Inc. and Lowe’s Cos. Inc. dropped at least 1 percent to help lead retailers to the biggest decline among 24 S&P 500 groups. U.S. Steel Corp., the country’s largest steelmaker, declined 6.4 percent after reporting an unexpected second-quarter loss. DuPont Co., the third-biggest U.S. chemical maker, gained 3.6 percent, on better-than-estimated earnings.
About three stocks declined for every two that rose on U.S. exchanges. The S&P 500 slipped 0.1 percent to 1,113.84 at 4 p.m. in New York. The Dow Jones Industrial Average rose 12.26 points, or 0.1 percent, to 10,537.69.
“It’s one step forward, two steps back,” said Mike Ryan, New York-based head of wealth management research for the Americas at UBS Financial Services Inc., which oversees about $640 billion. “We’ve seen a very solid earnings season. The numbers have been consistently above expectations. I don’t believe the economy is rolling over. However, we need to get more data on the economic front.”
The Dow average erased its 2010 loss yesterday and the S&P 500 closed above its 200-day average, spurring optimism among chart analysts and investors who track earnings. Projections for the fastest S&P 500 income growth since 1988 are helping investors overcome concern that the economy will sink into its second recession in three years.
Consumer Confidence
Stocks erased an early advance after a report showed confidence among U.S. consumers declined in July, a sign the lack of jobs will limit the economy’s recovery. The Conference Board’s confidence index fell to 50.4 from a revised 54.3 in June. The gauge was forecast to drop to 51, according the median estimate in a Bloomberg News survey.
“It’s a disappointment,” said John Carey, Boston-based money-manager at Pioneer Investment Management, which oversees more than $200 billion, referring to the consumer-confidence report. “We need to see consumers spending to get revenue growth that would boost earnings and stocks. We’re looking at fairly good profits, but we need to see real sales rebound.”
A gauge of retailers, hotel and restaurant chains and other consumer-discretionary companies fell 1.2 percent as a group, the most of 10 industries in the S&P 500, after the confidence data. Amazon lost 1.1 percent to $117.13, while Lowe’s dropped 3 percent to $21.15.
‘Noisy’
“Noisy” economic reports underscore the “unusually uncertain” outlook cited by Federal Reserve Chairman Ben S. Bernanke, according to Pacific Investment Management Co.’s Mohamed El-Erian. Corporate earnings are backward-looking, and the key economic issue is the U.S. labor market, Pimco’s chief executive and co-chief investment officer said in a radio interview today with Tom Keene on Bloomberg Surveillance.
“The minute someone puts out a green light, and earnings constituted a green light, you’ll see people rushing back into risk markets,” El-Erian said. “The indicators that we look at suggest that the economy continues to lose momentum. The key is going to be ultimately: is the economy creating enough jobs to make people comfortable, to allow companies to invest?”
U.S. Steel slid 6.4 percent to $45.76. The largest steelmaker unexpectedly posted a second-quarter loss after revaluing a $1.4 billion loan made to a European unit.
Of the 179 companies in the S&P 500 that reported results since July 12, about 82 percent have beaten the average analyst profit forecast and earnings per share have grown 60 percent, according to Bloomberg data.
DuPont, Lexmark
DuPont had the biggest gain in the Dow average, advancing 3.6 percent to $40.38 after reporting second-quarter profit that beat analysts’ estimates and raising its full-year earnings forecast amid improving global demand. Profit excluding some items was $1.17 a share, topping the 94-cent average estimate of 10 analysts surveyed by Bloomberg.
Lexmark International Inc. surged 8.5 percent to $37.76, for the biggest gain in the S&P 500. The maker of laser and inkjet printers posted second-quarter revenue and profit that topped analysts’ estimates on improving equipment and services sales. Profit excluding some items was $1.23 a share, exceeding the 93-cent average estimate in a Bloomberg survey.
Banks Rally
Banks had the second-biggest gain in the S&P 500 among 24 industries, following better-than-estimated earnings at Deutsche Bank AG and UBS AG. Wells Fargo & Co. climbed 1.7 percent to $28.39, while JPMorgan Chase & Co. gained 0.9 percent to $40.69.
UBS reported net income of 2.01 billion Swiss francs ($1.91 billion), beating the 1.12 billion-franc median estimate of analysts surveyed by Bloomberg News. Deutsche Bank said second- quarter net income rose to 1.16 billion euros ($1.5 billion), topping the average analyst estimate of 1.05 billion euros.
Banks also gained after the Basel Committee on Banking Supervision yesterday softened some of its proposed capital and liquidity rules while introducing new restrictions on how much lenders can borrow in order to rein in their risk-taking.
The panel agreed to allow certain assets, including minority stakes in other financial firms, to count as capital. The committee set a leverage ratio to apply to banks globally for the first time, which could become binding by 2018, pending further adjustments to the method of calculating banks’ assets.
To contact the reporter on this story: Rita Nazareth in New York at rnazareth@bloomberg.net.
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