Most U.S. Stocks Decline After Drop in Durable Goods Orders
Shoppers look for a new refrigerator in Glenview, Illinois. Photographer: John Zich/Bloomberg
July 28 (Bloomberg) -- Bloomberg's Courtney Donohoe reports on the performance of the U.S. equity market today. U.S. stocks fell, sending the Standard & Poor’s 500 Index lower for a second day, after orders or durable goods unexpectedly decreased and the Federal Reserve said economic growth slowed in some areas. Bloomberg's Pimm Fox also speaks. (Source: Bloomberg)
July 28 (Bloomberg) -- Barry Knapp, head of U.S. equity at Barclays Capital, talks about the outlook for the U.S. stock market. Knapp talks with Carol Massar, Jon Erlichman and Sheila Dharmarajan on Bloomberg Television's "In the Loop." (Source: Bloomberg)
U.S. stocks fell, sending the Standard & Poor’s 500 Index lower for a second day, after orders for durable goods unexpectedly decreased and the Federal Reserve said economic growth slowed in some areas.
Boeing Co. fell 1.9 percent, while WellPoint Inc. slumped 3.7 percent as second-quarter sales missed analysts’ estimates. Eastman Kodak Co. tumbled 15 percent after reporting a wider- than-projected second-quarter loss. Nine of 10 industries in the S&P 500 retreated after government data showing orders for goods meant to last at least three years declined 1 percent.
The S&P 500 lost 0.7 percent to 1,106.13 as of 4 p.m. in New York. The Dow Jones Industrial Average fell 39.81 points, or 0.4 percent, to 10,497.88. About three stocks declined for each that rose on U.S. exchanges.
“Most people feel that the economy is in a soft patch and the latest data points have been showing that,” said Mark Bronzo, an Irvington, New York-based fund manager at Security Global Investors, which oversees $23 billion. “The earnings season has been good. However, investors will probably sit back and wait until we get more clarity.”
The S&P 500 has rebounded 8.2 percent since July 2 as corporate earnings have been stronger than analysts estimated. It yesterday briefly erased its loss for the year as earnings at companies from DuPont Co. to Lexmark International Inc. topped estimates and home prices increased more than forecast.
Aircraft Demand
Stock futures reversed early gains after the Commerce Department reported that total orders for durable goods unexpectedly dropped, depressed by a decrease in demand for aircraft which is often volatile. Economists forecast total orders would climb 1 percent, according to the median estimate in a Bloomberg News survey.
Benchmark indexes extended declines after the Fed’s Beige Book business survey showed commercial real estate and the expiration of a tax credit for homebuyers was weighing on the economy in some areas.
“Economic activity has continued to increase, on balance, since the previous survey,” the Fed said today in its Beige Book business survey, while noting that two of the Fed’s 12 districts reported the economy “held steady” and two said the expansion slowed.
A gauge of industrial companies retreated 0.2 percent. GE fell 0.8 percent to $16.05.
Boeing
Boeing declined 1.9 percent to $67.32. The world’s second- biggest commercial-jet builder said second-quarter sales declined 9.2 percent to $15.6 billion, missing analysts’ $16.2 billion prediction.
Stocks also fell after a gauge of mortgage applications in the U.S. slid last week as refinancing cooled after borrowing costs jumped from a record low. The Mortgage Bankers Association’s index fell 4.4 percent in the week ended July 23, the Washington-based group said today.
“The scars remain,” said David Rosenberg, the chief economist at Gluskin Sheff & Associates Inc. in Toronto, in a radio interview today with Tom Keene on Bloomberg Surveillance. “The transition to the next sustainable economic expansion is usually between five and seven years. The good news is that we finished two years of this. The glass is half empty. There could be between three to five years to go of this sort of meandering weak growth environment.”
Eastman Kodak tumbled 15 percent, the biggest decline in the S&P 500, to $4.18. The photography company reported a second-quarter loss of 51 cents a share. The average analyst estimate in a Bloomberg survey was for a loss of 32 cents.
Slot Machines
International Game Technology slumped 10 percent to $15.02. The world’s biggest maker of slot machines reported fiscal third-quarter revenue of $489.7 million, 2.4 percent lower than the average of 13 analyst estimates in a Bloomberg survey.
WellPoint helped lead health-care companies to a 1.4 percent decline, the biggest among 10 industries in the S&P 500. The biggest U.S. health insurer reported second-quarter sales of $14.5 billion, missing the average analyst estimate in a Bloomberg survey of $14.6 billion. WellPoint slumped 3.7 percent to $50.83.
Hospira Inc. fell 7.2 percent to $52.72. The maker of generic injectable pharmaceuticals and infusion devices reported second-quarter sales that fell short of the average analyst estimate in a Bloomberg survey and lowered its forecast for full-year net income per share.
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. Earnings have topped analysts’ estimates at more than 80 percent of companies in the S&P 500 that have reported second-quarter results so far, according to data compiled by Bloomberg.
Travel Demand
Wyndham Worldwide Corp. jumped 8 percent to $25.14, the biggest gain in the S&P 500. The franchiser of Days Inn hotels and Super 8 motels raised its 2010 earnings forecast after second-quarter profit increased on rising travel demand. Full- year earnings per share excluding items will be $1.78 to $1.88. That compares with an earlier forecast of $1.56 to $1.71.
C.H. Robinson Worldwide Inc. rose 6 percent to $64.87. The transportation services company reported second quarter revenue and profit that exceeded the average analyst estimates in a Bloomberg survey.
The S&P 500 may fall as much as 15 percent in the next 10 weeks and investors should use further gains in equities as an opportunity to sell, technical analysts at UBS AG said. UBS analysts Michael Riesner and Marc Mueller reiterated their forecast that the U.S. benchmark gauge may decline to between 944 and 1,000, in a report dated yesterday.
“Anticipating another strong tactical down-leg below 1,000 in the S&P 500, we are sticking to our recent comments and would use any kind of strength in July to sell,” Zurich-based Riesner and Mueller wrote.
-- With assistance from Tom Keene, Ken Prewitt and Emily Haas- Godsil in New York, Adam Haigh in London and Julie Cruz in Frankfurt. Editors: Michael P. Regan, Joanna Ossinger
To contact the reporter on this story: Rita Nazareth in New York at rnazareth@bloomberg.net;
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