Stocks drift lower as uneven earnings weigh on market, putting two-week rally on hold

NEW YORK (AP) — Mixed reports on the economy and earnings Monday sent the stock market drifting lower and easing off a two-week rally that lifted major indexes 11 percent. A government report said sales of new homes in the U.S. rose by the largest amount in nearly nine years last month, but it also contained troubling news that home prices fell sharply from a year earlier. Stocks got an early lift from the report but quickly gave up the gains.

The latest batch of corporate earnings offered a mix of news.

RadioShack Corp. reported higher second-quarter earnings that beat forecasts, but mainly from cost-cutting — a theme that has become familiar this earnings season. Health insurer Aetna Inc. and manufacturer Honeywell International Inc. posted gloomier results.

Analysts said the market was due for a pause. Brian F. Reynolds, chief market strategist at WJB Capital Group, said investors were surprised by the strength of corporate earnings reports in the past two weeks.

“After a run of any direction stocks take a little break and people kind of catch their breath,” Reynolds said. “I think that’s especially true now because people were caught off guard. I think so many people were so bearish.”

In early afternoon trading, the Dow Jones industrial average fell 16.17, or 0.2 percent, to 9,077.07. The broader Standard & Poor’s 500 index fell 1.62, or 0.2 percent, to 977.64, while the Nasdaq composite index fell 8.43, or 0.4 percent, to 1,957.53.

Advancing stocks narrowly outnumbered those that fell on the New York Stock Exchange, where volume came to 587.7 million shares compared with 603 million traded at the same point Friday.

Bond prices fell, pushing yields higher. Prices showed little change after decent demand at a government bond auction. The yield on the benchmark 10-year Treasury note rose to 3.72 percent from 3.66 percent late Friday.

In economic news, the Commerce Department said new home sales rose 11 percent in June to 384,000, more than expected and the strongest pace since November 2008. Last week stocks got a lift from a separate report a better than expected sales of existing homes.

Among companies posting results, Aetna’s profit skidded 28 percent on higher medical expenses in its commercial business, and the health insurer cut its profit forecast for the second time in two months. The stock fell $1.24, or 4.7 percent, to $25.20.

Manufacturer Honeywell fell 1 cent to $33.98 as its earnings dropped 38 percent on trouble in automobiles and construction. Honeywell said it doesn’t expect to see a recovery this year.

Verizon, the nation’s largest wireless carrier, said profit fell 21 percent as cost-cutting in its wireline business failed to keep pace with falling revenues, but its adjusted earnings narrowly beat expectations. Verizon fell 63 cents, or 2 percent, to $30.87.

Investors have been buying stocks as companies from AT&T Inc. to chip maker Intel Corp. post earnings that are far stronger than analysts had predicted. Others, like heavy equipment maker Caterpillar Inc., have raised expectations for later in the year.

The reports have given investors the confidence to restart a rally that began in March, sending the S&P 500 rocketing 40 percent off a 12-year low before stalling in mid-June. The past two weeks have erased the monthlong slide and given new strength to the rally.

But some analysts remain cautious because expectations were low going into the weeks in which companies report results from the April-June quarter.

“Last week was dubbed as a good earnings week, but good compared to what?” asked David Hefty, CEO of Cornerstone Wealth Management in Auburn, Ind. “It doesn’t take a lot to get the market excited these days.”

The dollar was mixed against other major currencies, while gold prices rose.

Light, sweet crude rose 16 cents to $68.21 a barrel on the New York Mercantile Exchange.

The Russell 2000 index of smaller companies fell 0.51, or 0.1 percent, to 547.95.

Overseas, Japan’s Nikkei stock average rose 1.5 percent. Britain’s FTSE 100 rose 0.2 percent, Germany’s DAX index rose 0.4 percent, and France’s CAC-40 rose 0.2 percent.

source: yahoo finance

Tags: Crude, dollar, dow, economy, nasdaq, radioshack, russell 2000, stocks

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