Stocks Fall as Oil Surges
Stocks fell Tuesday as oil approached $120 per barrel, and Wall Street received a wave of earnings news.
Major profit reports came from AT&T (T), McDonald's (MCD), Texas Instruments (TXN) and Unitedhealth Group (UNH).
The spike in oil prices -- to a record high of $119.90 per barrel at one point on Tuesday -- was blamed on supply concerns and a weak dollar. Prices are up 24% so far this year and 88% from a year ago. While the federal economic stimulus bill is expected to give U.S. taxpayers an extra $130 billion this year, Tony Crescenzi of Miller Tabak says, "Unfortunately, this sizeable stimulus is at threat of being completely engulfed by the recent rise in energy costs."
On Tuesday, AT&T impressed investors with a 22% jump in profits, as the company posted earnings of 74 cents per share, vs. 65 cents a year ago. Revenue rose 6.1%.
McDonald's saw first-quarter profits rise 24%. It posted earnings of 81 cents per share, up from 62 cents a year ago, as revenue rose 6%.
Meanwhile, existing home sales fell 2% in March, to a pace of 4.93 million. Sales are down 19.3% from a year ago. Single-family sales fell 2.7%, while condo and coop sales were up 3.6%. There is now 9.9 months supply of homes on the market.
"There is some evidence of an easing in the pace of decline in home sales," said Bear Stearns chief U.S. economist John Ryding. But "it is too soon to say that the housing sector is bottoming out."
On Tuesday, the blue-chip Dow Jones industrial average fell 104.79 points, or 0.82%, to 12,720.23. The broader S&P 500 index dropped 12.23 points, or 0.88%, to 1,375.94. And the tech-heavy Nasdaq composite index lost 31.1 points, or 1.29%, to 2,376.94.
On the New York Stock Exchange, 23 stocks moved lower for every nine in positive territory. On the Nasdaq, the ratio was 22 to 7 negative.
The U.S. Redbook said Tuesday that same-store sales fell 1.3% in the week ended Apr. 19. The International Council of Shopping Centers chain store index dropped 0.7% in the week ended Apr. 19, after rising 0.9% the week before.
"Consumers over the last week continued to face strong headwinds with new record high gasoline prices hurting discretionary spending," said Michael P. Niemira, the council's chief economist. Action Economics says: "Though sales have been slowing, consumer has yet to show he is down and out, despite record oil prices, and fears of a U.S. recession."
Among other stocks in the news, UAL Corp. (UAUA) shares plunged 37% to 13.55 after the airline posted $4.45 first quarter loss per share, vs. $1.32 loss a year ago, as a $618 million increase in consolidated fuel expense offset a 7.7% rise in operating revenue.
Texas Instruments (TXN) reported earnings of 49 cents per share, vs. 35 cents a year ago, as revenue rose 3%. Revenue declined 8%, with weaker sales into cell phones. Second quarter earnings guidance, at 42 to 48 cents per share, was below Wall Street expectations. Its stock fell 5.8%.
UnitedHealth Group (UNH) shares fell 9.7% after it posted weaker-than-expected earnings of 78 cents per share, vs. 66 cents a year ago. Revenue rose 6.6%. The health insurer cut its 2008 profit prediction by 10%.
Novellus Systems (NVLS) posted earnings of 15 cents per share, vs. 42 cents a year ago, as sales fell 21%.
DuPont (DD) posted earnings of $1.31 per share, vs. $1.01 a year ago, as revenue rose 7.5%. The company maintained its previous 2008 earnings forecasts.
Peabody Energy (BTU) posted better-than-expected earnings of 21 cents per share, vs. 33 cents a year ago.
Higher expenses offset a 15% rise in revenue, but Peabody raised its 2008 earnings guidance.
CME Group (CME) posted earnings of $5.25 per share, vs. $3.69 a year ago, as revenue rose sharply.
Lockheed Martin (LMT) posted earnings of $1.75 per share, vs. $1.60 a year ago, as sales rose 7.6%.
AirTran Holdings (AAI) reported a loss of 38 cents per share, vs. earnings of 2 cents a year ago. Revenue rose 18%, but higher fuel costs and other expenses wiped out profits. The airline is cancelling plans to add capacity next year.
JetBlue Airways (JBLU) posted a 4 cent per share loss, vs. a 12-cent loss a year ago. Revenue was 34% higher. JetBlue plans to reduce capacity growth for 2008 by 3 to 5%.
Lexmark International (LXK) posted earnings of $1.07 per share, vs. 95 cents a year ago, as revenue fell 6.3%.
Netflix (NFLX) reported earnings of 21 cents per share, vs. 14 cents a year ago, as revenue rose 7%. It ended the quarter with 8.243 million subscribers, which represents growth of 21%.
Coach (COH) posted earnings of 46 cents per share, vs. 39 cents a year ago, as total sales were up 19%. The luxury goods maker expects sales and earnings to increase 22% this year.
Tellabs (TLAB) disappointed investors with earnings of 4 cents per share, down from 6 cents a year ago. Higher expenses offset a 3% rise in revenue.
Major European indexes were lower on Tuesday. In London, the FTSE 100 index edged down 0.3% to 6,034.70. Paris' CAC 40 index lost 0.77% to 4,872.64, and Germany's DAX index fell 0.86% to 6,728.30.
In Asia, Japan's Nikkei 225 fell 1.09% to 13,547.82, while Hong Kong's Hang Seng index was up 0.88% to 24,939.15.
Treasury prices rose Tuesday. The 10-year note rose 05/32 to 98-10/32 for a yield of 3.70%, and the 30-year bond climbed 18/32 to 98-21/32 for a yield of 4.46%.