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Stocks edge down at the start of big earnings week
Question of the Day
NEW YORK (AP) — Investors remained cautious Monday at the start of a big week for company earnings on Wall Street.
About a third of the companies in the Standard & Poor’s 500 index, including Exxon Mobil and Apple, are reporting earnings this week. Analysts expect earnings to rise by 2 percent in the first quarter, down from the 7.7 percent increase in the fourth quarter, according to S&P Capital IQ.
While the majority of companies that have reported earnings so far have beaten investors’ expectations, concerns remain about the outlook for revenues for the rest of the year. Caterpillar added to those worries Monday when it lowered its forecasts for full-year sales and profits because its mining business is slowing.
“Most of the companies seem to be coming in ahead of earnings expectations, but the thing that’s still problematic is the revenue line,” said Bill Stone, chief investment strategist at PNC Wealth Management. “To me it’s just symptomatic of the global economy continuing to sputter along.”
The Dow Jones industrial average was down 44 points, or 0.3 percent, to 14,505 as of 11:56 a.m. EDT. The S&P 500 index was little changed at 1,556.
Stocks are coming off a tough week.
Last week, both the S&P 500 and the Dow lost 2.1 percent, the biggest weekly drops since November, paring their advances after a strong start to the year.
News that economic growth had slowed in China set off a plunge in commodity prices last Monday, leading the stock market to its worst day of the year. Gold dropped below $1,400 an ounce for the first time in two years.
Caterpillar was little changed at $80.85 after its earnings report. The company’s stock is down 9.9 percent this year.
Sales of previously occupied U.S. homes dipped in March, the National Association of Realtors said Monday. That decline also weighed on the market. Sales slipped to a seasonally adjusted annual rate of 4.92 million, from 4.95 million in February.
Investors have been looking at first-quarter earnings critically.
Traders appear more likely to punish companies that miss expectations, rather than reward companies that beat them, Goldman Sachs said. According to the investment bank’s research, while 63 percent of stocks that beat analysts’ forecasts last week performed better than the overall market the next day, 73 percent of those that missed targets performed worse.
“If you look at this earnings season in general, it’s been disappointing,” said Ryan Detrick, a senior technical strategist at Schaeffer’s Investment Research. “The outlook and the revenues are the big concern.”
Hasbro, the maker of Transformers and My Little Pony, rose $1.17 to $46.19 even after it said that its first-quarter loss widened after heavy restructuring charges and foreign exchange rates flattened its international sales. The company’s performance was still better than Wall Street had expected.
Oil services company Halliburton also gained after its loss wasn’t as bad as analysts had forecast. Halliburton rose $1.75 to $38.96 after it said that it had lost $18 million in the first quarter, pulled down by $637 million in charges related to its role in the 2010 Gulf of Mexico oil spill.
In other trading, the Nasdaq composite gained 11 points, or 0.4 percent, to 3,201.
In government bond trading, the yield on the 10-year Treasury note fell to 1.70 percent from 1.71 percent late Friday as traders shifted money into lower-risk assets.
Among other stocks making big moves, General Electric fell 49 cents to $21.27 after JPMorgan cut its rating on the company to “neutral” from “overweight.” The company’s stock fell Friday following pessimistic comments from its CEO on the outlook for Europe and the company’s core industrial operations.
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