Dow Drops Most Since June Amid Disappointing Earnings

Oct. 23 (Bloomberg) -- Bloomberg’s Trish Regan, Matt Miller and Cory Johnson report on today’s ten most important stocks including 3M, Dupont and Facebook. (Source: Bloomberg)

U.S. stocks retreated, giving the Dow Jones Industrial Average its biggest decline since June, amid disappointing results at companies from 3M Co. to DuPont (DD) Co. and as commodities erased their gain for the year.

3M, the maker of products ranging from Scotch tapes to dental braces, and DuPont, the most valuable U.S. chemical maker, slumped at least 4.1 percent. Freeport-McMoRan Copper & Gold Inc. (FCX) and Halliburton Co. (HAL) dropped more than 3.1 percent as commodities sank amid concern about a global economic slowdown. Facebook Inc. (FB) surged 9.5 percent at 4:39 p.m. New York time after posting sales that topped analysts’ projections.

The Standard & Poor’s 500 Index decreased 1.4 percent to 1,413.11 at 4 p.m. New York time, the lowest level since Sept. 5. The Dow slumped 243.36 points, or 1.8 percent, to 13,102.53. Volume for exchange-listed stocks in the U.S. was 6.6 billion shares, or 9.1 percent above the three-month average.

“That’s the reality of the situation that investors are facing,” said Bruce Bittles, chief investment strategist at Milwaukee-based RW Baird & Co., which oversees $85 billion. He spoke in a phone interview. “There’s not much growth in the economy. There’s lack of demand. How can revenues grow?”

Photographer: Richard Drew/AP Photo

Trader Michael Zicchinolfi, center, works on the floor of the New York Stock Exchange on Oct. 22, 2012. Close

Trader Michael Zicchinolfi, center, works on the floor of the New York Stock Exchange on Oct. 22, 2012.

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Photographer: Richard Drew/AP Photo

Trader Michael Zicchinolfi, center, works on the floor of the New York Stock Exchange on Oct. 22, 2012.

Thirty-three companies in the S&P 500 were scheduled to release results today. Third-quarter sales missed forecasts at 60 percent of companies, according to data compiled by Bloomberg. Earnings at about 70 percent of the index’s companies beat analysts’ estimates, the data showed.

Earnings Concern

Concern about a worsening of the earnings picture has sent the S&P 500 down 3.6 percent from this year’s high on Sept. 14. The decline has extended its October loss to 1.9 percent after the index capped four straight months of gains. The benchmark measure is still up 12 percent in 2012 on speculation central bankers will keep economies expanding.

All 10 groups in the S&P 500 retreated at least 0.8 percent today as commodity and financial shares had the biggest losses. The Morgan Stanley Cyclical Index of companies most-tied to economic growth declined 1.1 percent.

“The earnings season has not gone as well as many would like,” said Tom Wirth, who helps manage $1.6 billion as senior investment officer for Chemung Canal Trust Co., in Elmira, New York. “In general, sales have been disappointing. There’s heightened concern about global growth.”

3M (MMM) dropped 4.1 percent to $88.73. The St. Paul, Minnesota- based company, which makes a majority of revenue in Europe and Asia, cut the profit target and the top end of its goal for sales from existing businesses to reflect what it called “current economic realities.”

1,500 Jobs

DuPont retreated 9.1 percent, the most in the Dow, to $45.25. The company said it will eliminate about 1,500 jobs after posting a smaller third-quarter profit than analysts estimated on falling demand for paint pigment.

Xerox Corp. fell 5.1 percent to $6.67. The provider of printers and business services said third-quarter profit fell 12 percent as demand for its equipment and supplies declined.

Commodity companies had the biggest losses in the S&P 500 among 10 industry groups, dropping at least 2.3 percent. Freeport-McMoRan declined 3.9 percent to $38.98. Halliburton dropped 3.2 percent to $33.47.

The Standard & Poor’s GSCI spot gauge of 24 raw materials fell for a third consecutive session, dropping 1.4 percent today. It first erased gains for the year in May and the last time it happened was in July. The last annual drop was in 2008.

Refiners Slump

Refiners including Tesoro Corp. (TSO) and Valero Energy Corp. (VLO) fell on speculation by Deutsche Bank that a win by Republican presidential candidate Mitt Romneymay threaten restrictions on U.S. crude exports. Tesoro fell 4.5 percent to $36.42. Valero dropped 3.8 percent to $28.36.

“We believe a Mitt Romney election win -- broadly supported by the refining industry -- could in fact threaten the crude export ban,” Paul Sankey, a Deutsche Bank energy analyst based in New York, wrote today in a note to investors.

Apple Inc. (AAPL) slid 3.3 percent to $613.36, after surging 4 percent yesterday. Chief Executive Officer Tim Cook introduced a smaller version of the iPad designed to keep customers from buying low-cost tablets from competitors Microsoft Corp., Amazon.com Inc. and Google Inc.

Apple, the most valuable company, unveiled the iPad at an event today in San Jose, California. The device boasts a 7.9- inch screen diagonally, compared with the 9.7-inch screen of the current iPad. It is priced starting at $329.

Regions Financial Corp. fell 7.6 percent to $6.54 after the bank said it would move as much as $400 million in loans to non- performing status in the fourth quarter.

Monster Beverage

Monster Beverage Corp. (MNST) slid 10 percent to $41.08. The company was removed from the Conviction Buy list at Goldman Sachs Group Inc. The shares tumbled 14 percent yesterday after its energy drinks have been cited in the deaths of five people in the past year, according to incident reports that doctors and companies submit to the U.S. Food and Drug Administration.

Facebook Inc. rose 0.9 percent to $19.50 ahead of its earnings report. The shares rallied 9.5 percent to $21.36 after the close of regular trading. Third-quarter sales rose 32 percent to $1.26 billion, Menlo Park, California-based Facebook said today in a statement. That compares with the average estimate of $1.23 billion, according to data compiled by Bloomberg. Profit excluding certain items also exceeded projections by a penny.

Coach Inc. (COH) surged 7.4 percent to $58.15. The largest U.S. luxury handbag maker reported fiscal first-quarter profit that exceeded analysts’ estimates as it kept expenses for acquisitions and e-commerce from increasing too quickly.

Turnaround Strategy

Yahoo! Inc. (YHOO) rose 5.7 percent to $16.67. New Chief Executive Officer Marissa Mayer outlined her turnaround strategy for the biggest U.S. Web portal, emphasizing mobile technology and personalized services.

United Parcel Service Inc. (UPS), which is considered an economic bellwether, rose 3 percent to $73.73. It reduced the top end of its 2012 profit forecast after posting third-quarter earnings that matched analysts’ estimates, buoyed by a gain in U.S. package volumes and international exports.

Harley-Davidson Inc. (HOG) added 7.7 percent to $46.89. The biggest U.S. motorcycle maker surged after touting new models headed to dealerships by 2015. New bikes coming by 2015 will benefit from the company’s focus on the flagship Harley brand, Chief Executive Officer Keith Wandell said today.

Federal Reserve Chairman Ben S. Bernanke is trying to inject a little of the exuberance his predecessor Alan Greenspan called “irrational” into markets for everything from stocks to housing.

Higher Yielding

Bernanke, who is seeking to spur the economy with a third round of so-called quantitative easing, has said his stimulus works by lowering borrowing costs and encouraging investors to seek higher-yielding assets. Boosting home and equity prices through bond buying will encourage consumers and businesses to spend more, according to Bernanke.

Since these are the same assets that plummeted during the financial crisis after reaching record highs, “is there some risk you could start a new bubble and repeat the whole cycle? I suppose there is,” said Robert Shiller, the Yale University professor who forecast the end of the Internet boom in his book, “Irrational Exuberance,” which was published in March 2000, the month the Nasdaq Composite Index peaked before crashing 78 percent.

To contact the reporter on this story: Rita Nazareth in New York at rnazareth@bloomberg.net

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

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