Alcoa, the largest U.S. aluminum producer, lost 4.6 percent after cutting its outlook for global demand for the metal. Chevron Corp. slid 4.2 percent after saying third-quarter earnings were “substantially” lower than the previous period. Wal-Mart Stores Inc. paced gains with consumer stocks, rising to a record price after saying it had a “very strong” back-to-school season and will add U.S. stores. Yum! Brands Inc. (YUM) rallied 8 percent after profit beat analyst estimates.
The S&P 500 (SPX) slipped 0.6 percent to 1,432.56 in New York. The benchmark gauge fell 1 percent yesterday, and is down 2 percent over four days. The Dow Jones Industrial Average lost 128.56 points, or 1 percent, to 13,344.97. More than 5.9 billion shares changed on U.S. exchanges today, about 1.5 percent below the three-month average.
“The fear is that this is going to be a really bad earnings season,” Hank Smith, chief investment officer at Haverford Trust Co. in Radnor, Pennsylvania, said in a telephone interview. His firm oversees $6.5 billion in assets. “If S&P 500 earnings come in better than expectations, the markets are going to view that positively. We’re off to a good start but we’ve got a long way to go.”
Alcoa unofficially marked the start of a third-quarter earnings season that is forecast to show S&P 500 profits and sales fell in unison for the first time in three years, according to analysts’ estimates compiled by Bloomberg. Per-share earnings in the S&P 500 are projected to have dropped 1.7 percent after they were little changed in the second quarter. Sales may have slipped 0.6 percent, the data show.
Global equities slumped as China car sales unexpectedly shrank for the first time in eight months. French President Francois Hollande and Spanish Prime Minister Mariano Rajoy called on nations such as Germany to honor commitments on a banking union made at the European Council in June. The International Monetary Fund said European banks may need to shrink assets if policy makers fall short of pledges to stem the fiscal crisis.
The S&P 500 briefly pared losses after the Federal Reserve said in its Beige Book business survey that the U.S. economy expanded “modestly” last month. The benchmark equity measure has retreated for the past four days as the IMF reduced estimates for global economic growth. The index has still rallied 12 percent from this year’s low on June 1 as the Fed unveiled a third round of bond purchases.
Alcoa lost 4.6 percent to $8.71. The first member of the Dow average to report results trimmed its forecast for growth in aluminum consumption this year to 6 percent from 7 percent amid slowing demand from China. The company posted third-quarter earnings and sales yesterday that exceeded analysts’ projections.
Investors sold shares of companies most tied to economic growth. The Morgan Stanley Cyclical Index, a gauge of 30 U.S. stocks, lost 0.8 percent to decline for the third straight day. Nine out of 10 groups in the S&P 500 fell, as energy companies slumped 1.8 percent for the biggest decline. Tesoro Corp. erased 5.6 percent to $38.70. Material stocks retreated 1 percent for the second-largest drop.
Chevron (CVX) slipped 4.2 percent to $112.45 after the company said earnings dropped in the third quarter from the previous period amid lower oil output because of Hurricane Isaac, falling crude prices and weaker U.S. refining returns. Oil and natural gas output declined 4 percent to the equivalent of 2.518 million barrels a day in June and July from 2.624 million for the entire second quarter. Chevron also said a shuttered crude-processing unit at a California refinery won’t resume operations before the end of the year.
H&R Block Inc. (HRB) retreated 5.4 percent to $16.67. The largest U.S. tax preparer hired Goldman Sachs Group Inc. to advise on alternatives for its bank. The Kansas City, Missouri-based company is considering dropping its designation as a savings and loan holding company after the Fed proposed rules requiring such firms to keep additional capital.
Monster Beverage Corp. (MNST) erased 5.5 percent to $53.63. The largest U.S. energy drink maker by sales volume was cut to hold from buy by Stifel Nicolaus & Co. analyst Mark Astrachan, who cited greater-than-anticipated deceleration in revenue growth through the first quarter.
Cummins Inc. (CMI) slid 3.4 percent to $87.79. The maker of engines said it expects to cut as many as 1,500 jobs by the end of 2012 and lowered its forecasts for revenue and profit. Caterpillar Inc. (CAT), the world’s largest construction and mining equipment maker, fell 1.9 percent to $83.16.
MetroPCS Communications Inc. sank 3.8 percent to $12.04. Sprint Nextel Corp. is holding off on an immediate counterbid for MetroPCS to gain time to scrutinize the carrier’s planned combination with T-Mobile USA Inc., said people familiar with the situation.
Wal-Mart (WMT) rose 1.7 percent, the most in the Dow, to a record $75.42 after the world’s largest retailer said in an investor community meeting it had a “very strong” back-to-school season that will continue into the holiday period. The company also said it will add 205 U.S. locations in 2013 and 240 in 2014. McDonald’s Corp. (MCD), the biggest restaurant chain, gained 0.3 percent to $92.40.
Costco Wholesale Corp. (COST) added 1.9 percent to $101.56. The largest U.S. warehouse-club chain posted fiscal fourth-quarter profit that topped analysts’ estimates as low prices drove sales. Earnings in the quarter ended Aug. 31 were $1.39 a share. Analysts projected $1.31, the average of 25 estimates compiled by Bloomberg.
Third-quarter earnings at the eight food and consumer-staples retailers in the S&P 500 increased 8 percent, according to analysts’estimates.
“One should look toward consumer companies as a beacon of light for improved earnings in this quarter, but the overall theme that will be echoed from management will be of a more conservative nature,” Chad Morganlander, a Florham Park, New Jersey-based fund manager at Stifel Nicolaus & Co., which oversees about $138 billion in client assets, said by phone. “It’s going to be a deceleration from previous quarters.”
Yum jumped 8 percent to $70.99. The owner of the Taco Bell and KFC fast-food chains reported a 23 percent increase in third-quarter net income as sales climbed in the U.S. and China. Profit excluding some items was 99 cents a share, compared with the 97 cent average of 22 analyst estimates compiled by Bloomberg.
Apple Inc. (AAPL), the world’s most valuable company, climbed 0.8 percent to $640.91 after four straight losses that extended the iPad maker’s retreat from a record high on Sept. 19. to 9.4 percent.
FedEx Corp. (FDX) rose 5.2 percent to $89.99 after setting a goal to boost profit by $1.7 billion within three years, primarily by cutting costs, as customers shift to slower and cheaper deliveries from overnight shipments.
True Religion Apparel Inc. (TRLG) surged 22 percent to $25.71. The maker of the namesake designer jeans said it will explore strategic alternatives, including a possible sale. The board has formed a special committee to consider options after receiving interest from third parties about a possible transaction, Vernon, California-based True Religion said today in a statement.
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