US stocks fall as earnings disappoint
NEW YORK, USA — DISAPPOINTING company earnings and falling oil prices pulled stocks back from record highs yesterday.
NRG Energy slumped after the company lowered its earnings forecast, leading other power companies lower. News Corp fell after the media company posted an unexpected revenue decline due to weakness at its Australian newspapers. Energy stocks declined after oil dropped to a five-month low.
Winners included airlines. The gains were led by JetBlue Airways after the Justice Department said it cleared the way for American Airlines and US Airways to merge, creating the world’s biggest airline.
This year’s 24 per cent surge in the stock market has slowed in November. The Standard & Poor’s 500 has edged up 0.6 per cent this month after an average monthly increase of 1.7 per cent in the previous 10 months.
“The market looks tired to us,” said Jim Russell, a regional investment director at US Bank. “A little bit of a pause is actually healthy,” allowing the economy time to catch up to the gains the stock market has made.
After closing at an all-time high on three of the previous four trading days, the Dow Jones industrial average fell 32.43 points, or 0.2 per cent, to 15,750.67. The S&P 500 index dropped 4.20 points, or 0.2 per cent, to 1,767.69 points. The Nasdaq composite edged up 0.13 point to 3,919.92.
Six of the 10 industry groups in the S&P 500 index fell. Banks and utilities slid the most.
NRG Energy was one of the biggest decliners in the S&P 500, slipping 98 cents, or 3.5 per cent, to US$27.06. News Corp fell 27 cents, or 1.5 per cent, to US$17.15.
Energy stocks fell broadly. Pioneer Natural Resources, an oil exploration company, dropped US$5.63, or 3 per cent, to US$182.70. Chevron lost US$1.20, or 0.9 per cent, to US$120.
Stocks have climbed this year as the Federal Reserve has maintained its US$85 billion in monthly bond purchases to keep interest rates low and encourage borrowing and hiring. Now, investors may start focusing more on an improving economy rather than the future of the Fed’s economic stimulus programme, said Joe Quinlan, chief market strategist for US Trust Bank of America Private Wealth Management.
The US economy expanded at an annual rate of 2.8 per cent in the third quarter, up from 2.5 per cent in the previous quarter and more than economists anticipated, the government reported last Thursday. That was followed by an unexpectedly strong October jobs report.
“Economic data has really come in strong of late,” said Douglas Cote, chief market strategist at ING Investment Management. “There’s a lot of room for this market to continue higher in 2014.”
Investors will also be following Thursday’s confirmation hearing for Janet Yellen, who has been nominated to succeed Fed Chairman Ben Bernanke. They’ll look for clues about when the Fed may begin to scale back its economic stimulus.
“Some discussion of tapering could well take place” next month, Fed Bank of Atlanta President Dennis Lockhart said Thursday in a radio interview with Bloomberg Radio. The Fed’s last policy meeting of the year starts December 18.
In US government bond trading, the yield on the 10-year Treasury note climbed to 2.78 per cent from 2.75 per cent Friday. The bond market was closed Monday for the Veterans Day holiday.
In commodities trading, the price of oil slumped as the market anticipated another increase in domestic supplies. Oil fell US$2.10, or 2.2 per cent, to US$93.04 a barrel, its lowest price in five months.
Among other stocks making big moves:
— Dean Foods, a major milk producer, dropped US$1.51, or 7.7 per cent, to US$18.20 after cutting its profit forecast.
— JetBlue rose 47 cents, or 6.1 per cent, to US$8.16 after the government said it had reached a settlement with US Airways and American Airlines. American and US Airways will have to give up take-off and landing slots at major airports as part of the deal.
— D R Horton rose 85 cents, or 4.7 per cent, to US$18.91 after the homebuilder said its net income jumped 39 per cent in its fiscal fourth quarter and that sales of new homes rose in October.