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Weak earnings prospects weigh on stocks
NEW YORK (AP) — Disappointing quarterly results, including a subscriber slump at AT&T and a weak profit forecast from Procter & Gamble, held back the stock market Wednesday.
The results from the two big-name companies came on a day on which many corporations reported first-quarter results, with mixed results. The Dow fell 0.2 percent, while the Standard & Poor’s 500 index was flat.
P&G, the maker of Tide detergent and Gillette razors, dropped 5.3 percent to $77.65 after its profit forecast missed expectations from financial analysts who follow the company.
P&G’s outlook was hurt by the mixed response to its new products. AT&T dropped 5.8 percent to $36.75 after it lost phone subscribers from its contract-based plans as smartphone sales slowed.
Investors also were disappointed by sales growth at biotech giant Amgen and flat revenues at drugmaker Eli Lilly.
The prices of oil and gold rose, and the yield on the benchmark 10-year Treasury note was unchanged.
Investors are taking their cue from a heavy dose of quarterly earnings this week.
While the majority of companies have reported better-than-expected profits so far, their sales haven’t been as strong, suggesting they are struggling to grow.
Sixty-nine percent of companies in the S&P 500 have beaten expectations, better than the 10-year average of 62 percent, according to S&P Capital IQ. However, only 42 percent have beaten revenue forecasts.
Looking ahead, the outlook dims. Of the 35 companies that have given earnings forecasts for the second quarter, 28 are “negative,” according to S&P Capital IQ, with only four “positive” and three “in-line.”
“We think that most managements are appropriately cautious in their outlooks, because it’s very possible that the second quarter will continue to slow,” said Jim Russell, a regional investment director at U.S. Bank. “We’re watching with cautious optimism that this is a second-quarter-only soft patch in the economic data.”
A report Wednesday that orders for long-lasting U.S. factory goods fell more than economists expected added to signs that global growth is cooling.
The Commerce Department said orders for durable goods declined 5.7 percent in March following a 4.3 percent gain the previous month. February’s figure was also revised lower.
The Dow Jones industrial average was down 0.2 percent at 14,688 in early afternoon trading Wednesday. The S&P 500 index rose a fraction of a point to 1,579. The Nasdaq composite was down three points, or 0.1 percent, at 3,267.
Stocks logged their biggest weekly drop in five months last week after growth in China, the world’s second-biggest economy, slowed. Weaker hiring and manufacturing growth also have weighed on the stock market this month.
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