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NEW YORK (AP) — Stocks fluctuated Wednesday after companies gave mixed forecasts about how the fragile economy and rising costs will affect their growth.
The Dow Jones Industrial average fell 26 points, or 0.2 percent, to 11,380 in midafternoon trading. It was up as much as 120 around 10:30 a.m. The S&P 500 fell 1, or 0.2 percent, to 1,191. The Nasdaq composite fell 21, or 0.8 percent, to 2,502.
Target Corp., Staples Inc. and Dell Inc. all reported earnings for last quarter that were above analysts’ forecasts. Companies in the Standard & Poor’s 500 are on track to report higher profits for a ninth straight quarter. But economic growth is weak around the world, and some economists worry that a second recession may be coming. Investors fear that could hurt companies’ earnings in the future.
Four of the 10 sectors that make up the S&P 500 fell. Technology led the falling stocks with a 1.2 percent drop after Dell’s cut its forecast. More stocks rose than fell on the New York Stock Exchange, but only by a slim margin: About 16 rose for every 14 that fell.
“There are a whole bunch of contradictory signals in the system now, and it’s hard to tell which way to go,” said Charlie Smith, chief investment officer of Fort Pitt Capital Group, which has just over $1 billion in assets under management.
Investors are still worried about Europe. Some countries have borrowed so much that they may not be able to repay their bonds, and economic growth there has slowed. Concerns about a possible default by a European country have dominated the market in recent weeks, along with worries about the slow U.S. economy.
The increased role of automated trading by computers has increased volatility and made investing more difficult. “When you get a piece of news, it’s almost like the machines are trying to out-quick each other,” and they are sending stocks in straight lines up or down, Mr. Smith said. “That’s what really scares retail investors. We try to sit and wait in the weeds for good businesses at good prices.”
He has focused on telecom stocks and cable companies. Their relatively big dividend yields look more attractive, given the low yields on bonds. The yield on the 10-year Treasury note is at 2.17 percent, down from 3.34 percent at the start of the year.
Telecom stocks in the S&P 500 rose 1.5 percent Wednesday, the most among the 10 sectors that make up the index.
Companies also are feeling more pressure on costs. Higher food prices helped push inflation at the wholesale level to 0.2 percent in July, according to a government report Wednesday. That figure compares with a 0.4 percent drop in June but is still well below inflation levels earlier this year, when violence in the Middle East forced up oil prices. In February, wholesale prices rose 1.5 percent.
Preppy apparel retailer Abercrombie & Fitch Co. fell 7.8 percent after its CEO warned of challenges ahead. “Costing pressures will be greater in the second half of the year, and macroeconomic uncertainty has increased,” Mike Jeffries said after the company reported a 64 percent rise in profit last quarter.
Dell said late Tuesday its profit rose 63 percent last quarter on strong demand from businesses and government agencies. But it also cited “a more uncertain demand environment” when it cut its forecast for annual revenue growth to a range of 1 percent to 5 percent. That’s down from an earlier growth forecast for 5 percent to 9 percent. Dell stock fell 10.3 percent Wednesday.
Other companies are more optimistic. Retailer Target said it expects to earn between $4.15 and $4.30 per share this year. Analysts expected $4.14. Target also said its earnings last quarter rose 3.7 percent on sales of grocery, beauty products and other items. Target stock rose 2.1 percent.
Office products retailer Staples raised its profit forecast for the year after saying strong international sales pushed earnings up 36 percent last quarter.
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