U.S. Stocks Fall Amid Coca-Cola Earnings, Stimulus Debate

U.S. stocks fell, halting the longest rally in the Standard & Poor’s 500 Index since January, as Coca-Cola Co.’s profit dropped and a Federal Reserve official called for cuts to stimulus.

Coca-Cola slid 1.9 percent as the beverage company said volumes missed estimates amid slowing economic growth in China and Europe. Goldman Sachs Group Inc. dropped 1.7 percent even after profit beat analysts’ projections. Automakers slid 1.8 percent after Goldman downgraded the group to neutral from buy, with Ford Motor Co. sliding 3 percent. Baidu Inc. jumped 4 percent after agreeing to acquire 91 Wireless for $1.9 billion.

The S&P 500 fell 0.4 percent to 1,676.26 at 4 p.m. in New York, after rising eight straight sessions to a record close yesterday. The Dow Jones Industrial Average lost 32.41 points, or 0.2 percent, to 15,451.85. Almost 5.5 billion shares traded hands on U.S. exchanges today, or 15 percent below the three-month average.

“Hawkish comments from Kansas City Fed President George as to the timing of adjustments to the Fed’s bond purchases are putting modest pressure on the indices,” Ryan Larson, the Chicago-based head of U.S. equity trading at RBC Global Asset Management (U.S.) Inc., said in an interview. His firm oversees $290 billion. “Outside of that, earnings are in the early stages and many are waiting for chairman Bernanke’s testimony to Congress tomorrow for further direction about future Fed policy.”

George Speaks

The S&P 500’s decline accelerated after Fed Bank of Kansas City President Esther George said the U.S. was on the “right path” for economic recovery and that cuts in the pace of stimulus are “appropriate.” George, speaking on Fox Business Network, also said inflation appears to be “moderate” and the benchmark interest rate should not be held too low for too long.

Fed Chairman Ben S. Bernanke bolstered the rally last week after he backed sustained monetary stimulus. Bernanke will deliver his semi-annual monetary policy report to Congress this week, starting tomorrow at the House Financial Services Committee.

Central bank stimulus has helped fuel a surge in stocks worldwide, with the benchmark U.S. index jumping as much as 149 percent from its March 2009 low. Fed policy makers have been debating the timing and pace of any cuts in the central bank’s $85 billion in monthly bond purchases. Bernanke has said any reduction will be tied to sustained improvement in the labor market or an increase in inflation.

Consumer Prices

A report today showed the cost of living in the U.S. rose in June as gasoline prices increased the most in four months. The consumer-price index increased 0.5 percent after a 0.1 percent gain the prior month, Labor Department figures showed. The median forecast in a Bloomberg survey called for a 0.3 percent rise.

Separate data showed that industrial production rose in June by the most in four months, signaling U.S. manufacturing is improving heading into the second half of the year. Output at factories, mines and utilities climbed 0.3 percent, the biggest advance since February, after being little changed in May.

The Chicago Board Options Exchange Volatility Index, which measures the cost of protecting against swings on the S&P 500, jumped 4.6 percent to 14.42. The gain snapped eight consecutive declines, the longest streak of losses since October 2011.

About 72 percent of the S&P 500 companies that have reported earnings so far have beaten analyst forecasts, data compiled by Bloomberg show. Yahoo! Inc. fell 1.9 percent at 4:41 p.m. in New York after reporting sales that missed estimates.

Earnings Reports

Coca-Cola declined 1.9 percent to $40.23 for the biggest drop in the Dow. Profit fell 4 percent, the second quarterly decline in a row, as sales were sapped by economic weakness in China and Europe, shifting tastes in the U.S. and unseasonable weather in places such as India.

Goldman Sachs dropped 1.7 percent to $160.24 even as the bank reported earnings that topped analysts’ estimates on a jump in fixed-income trading and investment-banking revenue. The stock had gained 28 percent this year through yesterday.

Automakers plunged 1.8 percent as a group, the biggest decline among 24 industries in the S&P 500. Goldman cut the industry to neutral for the first time since 2009, saying car stocks typically lag when interest rates rise. Data yesterday showed sales at car and parts dealers gained the most in seven months in June.

Ford, GM

Ford Motor Co. slid 3 percent to $16.60 after Goldman removed the carmaker from its conviction buy list. The firm maintained a buy rating on the stock. Delphi Automotive Plc fell 1.8 percent to $54 after Goldman downgraded the parts supplier to neutral from buy.

General Motors Co. dropped 0.9 percent to $36.18, reversing an earlier gain of as much as 1.2 percent. The company said its global first-half sales climbed 3.9 percent on gains in the U.S. and China. Goldman added the stock to its conviction buy list.

Charles Schwab Corp. sank 3.3 percent to $21. The company reported second-quarter adjusted profit of 18 cents a share, below estimates for 19 cents a share.

Cintas Corp. retreated 1.7 percent to $47.06. The uniform maker forecast earnings for the 2014 fiscal period of $2.66 to $2.75 a share. That’s less than the $2.79 per share projected by analysts.

Energy shares dropped 0.6 percent as Marathon Petroleum Corp. became the second oil refiner to say second-quarter results would miss estimates.

Refiner Forecasts

Marathon fell 4.3 percent to $69.93, the most in the S&P 500. The company said late yesterday that it expects second-quarter earnings of $1.75 to $1.85 a share, below estimates of $2.62 a share. Competitor Valero Energy Corp. last week issued a forecast that fell short of forecasts. Valero slid 1.7 percent to $34.78 today.

HCA Holdings Inc. climbed 4.4 percent to $38.86. The largest for-profit U.S. hospital chain preliminary earnings beat analysts’ estimates on an increase in patient admissions. Tenet Healthcare Corp. added 3.4 percent to $45.19 for the second-biggest gain in the S&P 500.

DaVita HealthCare Partners Inc. dropped 1.9 percent to $117.96 as Goldman Sachs cut its rating on the provider of kidney-dialysis services to sell from neutral. The stock had slipped only 0.7 percent since the U.S. Medicare system proposed cutting payments by 9.4 percent next year, showing investors may be too optimistic regarding a final dialysis rate, Goldman said.

Baidu Inc. rose 4 percent to $105.69, the highest since February. The owner of China’s largest search engine agreed to buy app store 91 Wireless for $1.9 billion in its biggest announced acquisition, hoping to gain a greater share of the mobile user market.

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