U.S. Market Snapshot: Stocks Fall on Downbeat Economic Data
U.S. stocks surrendered some of yesterday’s strong gains as weak data on personal income and spending and a drop in the pending home sales index, along with bleak earnings prospects from reporting consumer companies stoked fears that the economic recovery was losing momentum. Investors shunned risky assets and turned to the safety of U.S. treasurys. Modest gains in July’s U.S. car sales also raised concerns about the health of the industry’s recovery.
In earnings, 352 companies in the S&P 500 so far have reported, with 268, or 76%, beating the average estimates of analysts. Average estimates for earnings-per-share have been revised up slightly to US$20.70 from US$20.67, and actual EPS currently stands at US$20.53. See RGE Critical Issue: “Another Strong Quarter for U.S. Equities Earnings in Q2 2010?“
Proctor and Gamble’s Co. quarterly earnings fell to US$2.19 billion, or 71 cents a share (below market expectations for 73 cents), from US$2.47 billion, or 80 cents a share, a year earlier. A 12% decline in profits reflected heavy investments in marketing and new products and price promotions. Revenue increased 4.7% to US$18.93 billion, however, sales were below company’s projections.
Pfizer Inc. reported Q2 earnings of $2.48 billion, or 31 cents a share, versus $2.26 billion, or 34 cents a share, a year earlier. Revenue rose 58% to $17.3 billion. Pfizer also issued an upbeat forecast and expects to hit the upper end of its previous forecast range for full-year earnings. The company also reiterated its financial targets for 2012, which will be the first full year after losing its U.S. patent protection for Lipitor in 2011, WSJ reports.
The Dow slid 0.36% with three out of nine sectors in positive territory. Energy, health care and telecom were higher for the day. Pfizer shares rose 5.5% to US$16.34 on reporting better-than-expected earnings. Consumer goods were the biggest laggard losing 1.6% on the weakness in PG, which fell 3.4% to US$59.94 due to issuing a downbeat forecast.
The S&P 500 fell 0.48%, with eight out of ten sectors in the red. The broader decline was led by basic materials, which were down 1.62% as Dow shares dropped 10% to US$25.50 on earnings trailing market consensus. Consumer services were also down 1.09% with the retailers subsector falling 3% on reported weak consumer income and spending growth. Only healthcare and energy were in positive territory.
In Canada, the S&P/TSX composite index rose 0.59% on the strength in health care (up 2.06%) and industrials (up 1.5%). Telecoms, consumer goods and technology sectors were the decliners for the day.
Into close, the S&P 500 index fell 5.41 points or 0.48% to end at 1,120.45.
The Dow lost 38.00 points or 0.36% to close at 10,636.38.
The tech-heavy Nasdaq composite index was down 11.84 points, or 0.52%, to close at 2,283.52.
On the economic calendar, the U.S. Bureau of Economic Analysis reported that personal income grew less than 0.1% m/m in June 2010, rising to US$3billion, after rising 0.3% in May. Disposable personal income in June also rose but remained largely flat, rising less than 0.1% m/m. Income from wages and salaries fell back by 0.1% m/m after a 0.4% m/m gains in May and April. (The decline may reflect the loss of Census-related jobs, which had boosted wages in May). Proprietors income contracted sharply in June, falling by 0.4% m/m after a 0.2% rise in May. Income on assets remained weak, posting a 0.1% gain with income from dividends slowing to a 0.2% gain from a 0.5% gain in May 2010. Personal tax payments contracted 0.2% m/m.
National Association of Realtors (NAR) reported that the Pending Home Sales Index, a forward-looking indicator, declined 2.6% m/m to 75.7 (-18.6% y/y) based on contracts signed in June 2010. (Home sales are recorded at closing, which normally occurs with a lag time of one or two months from the signing of the contract). The index declined for the second straight month, after collapsing 30% m/m in May following the expiration of the first-time homebuyer tax credit. NAR Chief Economist Lawrence Yun noted that “there could be a couple of additional months of slow home-sales activity before picking up later in the year, provided the job market continues to improve.”
Treasury prices rose with the yield on the benchmark 10-year Treasury note down to 2.9%, down from 2.96% from late Monday.
In commodity markets, light crude for September delivery settled US$1.21 higher, or up 1.5%, at US$82.55 per barrel on the New York Mercantile Exchange.
In currency markets today, the dollar weakened against the euro and yen. EUR/USD traded at 1.3233, up from 1.3180 late on Monday in New York; Cable was quoted at 1.59563, up from 1.5894. USD/JPY traded at 85.86, down from 86.44. USD/CHF was at 1.0390, down from 1.0392, while USD/CAD was quoted at 1.0237, up from 1.0234.
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