Corporate results worries sink stocks
US stocks closed slightly lower yesterday as lingering questions about Europe’s debt crisis and corporate earnings overshadowed growing optimism about economic growth after a five-week rally.
The S&P has risen about seven per cent so far this year, helped by a slew of better-than-expected US economic data, which was capped by Friday’s solid jobs report.
The magnitude and swiftness of the gains, however, has kept some investors on the sidelines. The S&P is at levels not seen since July, and the ongoing worries about Europe and corporate results have some wondering if the market has more room to rally.
Through yesterday morning, of the 290 companies in the S&P 500 that had reported results so far for the quarter, 60 per cent posted profits that topped expectations, tracking below recent quarters at this point of the earnings season.
“Companies aren’t surprising on the upside like they have in previous quarters, which could mean slow going for stocks for a while,” said Tommy Huie, president and chief investment officer at BMO Asset Management in Milwaukee. “That said, I can see us near 1,400 on the S&P by summer if we get decent news out of Europe.”
Another deadline lapsed in Athens as political leaders failed to respond to bailout terms from the European Union and International Monetary Fund. Greece needs the funds by March in order to meet big debt repayments and avoid a messy default.
The Dow Jones industrial average was down 17.10 points, or 0.13 per cent, at 12,845.13. The Standard & Poor’s 500 Index was down 0.57 points, or 0.04 per cent, at 1,344.33. The Nasdaq Composite Index was down 3.67 points, or 0.13 per cent, at 2,901.99.
“It’s not surprising for the market to catch its breath after the very strong start to the year that we’ve seen, especially as there are still a lot of concerns about what will happen in Europe,” said Bernie Schoenfeld, senior investment strategist at BNY Mellon Wealth Management in New York. “We’re treading water in a fairly calm market at this point, but some retracement wouldn’t be surprising.”
Hasbro rose 2.2 per cent to $36.66 after the toymaker reported a fourth-quarter profit just above analysts’ lowered expectations. Humana posted a big rise in fourth-quarter profit, but revenues came in below estimates, sending shares down 5.4 per cent.