U.S. Stocks Head for Biggest Loss in 2 Years; GE Shares Slide Listen
Jan. 20 (Bloomberg) -- U.S. stocks fell the most in more than two years on earnings shortfalls and oil's surge past $68 a barrel. The Dow Jones Industrial Average wiped out its 2006 advance and dropped more than 200 points.
General Electric Co. and Citigroup Inc. declined after the companies reported results that trailed some analysts' estimates. Motorola Inc. slid after sales at the world's No. 2 mobile-phone maker missed predictions.
``The earnings disappointments got people in a sell mode,'' said Evan Olsen, head trader at Stephens Inc. in Little Rock, Arkansas. ``With oil prices looking like they could be heading to $70, that probably plays in there as well.''
The Dow average fell 213.73, or 2 percent, to 10,666.98 as of 3:46 p.m. in New York, leaving it down 0.5 percent in 2006 and on track for its biggest drop since May 2003. The Standard & Poor's 500 Index lost 21.15, or 1.8 percent, to 1261.89, heading toward the worst performance since September 2003.
Google Inc. fell for a third day, contributing to the Nasdaq Composite Index's slump. The index, which gets 44 percent of its value from technology companies, lost 55.27, or 2.4 percent, to 2246.54.
Weaker-than-expected results from Intel Corp. and Yahoo! Inc. this week have shaken investors' confidence about profit growth. The S&P 500, which had risen as much as 3.7 percent this year, is down 2 percent this week. The Dow average has lost 2.7 percent.
The Nasdaq has dropped 3 percent this week. Intel, the No. 1 maker of semiconductors, and Yahoo, owner of the most- visited Web site, have each slumped at least 15 percent.
Earnings Expectations
Analysts have reduced their earnings expectations since the fourth quarter began. Companies in the S&P 500 are now expected to report average profit growth for the period of 12.7 percent, compared with September projections of 15.5 percent, according to Bloomberg analysis of Thomson Financial data. Analysts expect growth to slow further in the first quarter to 9.9 percent.
GE lost $1.35 to $33.33 and was the top drag on the S&P 500. The world's No. 2 company by market value reported its smallest profit gain since 2004 after Chief Executive Officer Jeffrey Immelt exited the insurance business. Fourth-quarter profit from continuing operations rose to 55 cents a share from 54 cents. Sales increased 2.6 percent to $40.7 billion, less than some analysts' estimates.
Citigroup
Citigroup, the largest U.S. bank, fell $1.98 to $45.96 and was the biggest drag on the Dow average. Fourth-quarter earnings excluding some items and discontinued operations, were $4.97 billion, or 98 cents a share. On that basis, it was expected to earn $5.05 billion, or $1, the average analyst estimates in a Thomson survey.
Motorola lost $1.82, or 7.5 percent, to $22.53 for the second-steepest drop in the S&P 500. Fourth-quarter sales were $10.4 billion, less than an estimate of $10.6 billion by JPMorgan analyst Ehud Gelblum and other analysts. Motorola said yesterday it made less per handset sold in the fourth quarter and said it couldn't meet demand because of problems getting parts for some new models.
Investors will get a clearer sense of the earnings picture next week when more than a quarter of S&P 500 companies are scheduled to announce. American Express Co., the No. 4 credit- card issuer, reports on Jan. 23, followed a day later by Johnson & Johnson, the world's largest maker of medical devices, and McDonald's Corp., the biggest restaurant chain.
`Early in the Game'
``It's still early in the game to draw too many longer-term conclusions from this,'' said Hans Olsen, who oversees $2 billion as chief investment officer at Bingham Legg Advisers LLC in Boston. ``In aggregate, the earnings are not terribly bad so far.''
More than four stocks fell for every one that rose on the New York Stock Exchange. Some 1.86 billion shares changed hands on the Big Board, 33 percent more than the same time a week ago.
Crude oil for February delivery climbed 2.3 percent to $68.35 a barrel in New York, the highest since September, on concern supplies are at risk amid unrest in Nigeria and Iran's defiance over its nuclear program.
``There is a point where you start to negatively impact'' economic growth, said Russ Koesterich, a fund manager at Barclays Global Investors in San Francisco. ``And we're bouncing up against those levels again.''
Consumer Confidence
The rise in oil prices overshadowed a bigger-than-expected increase in consumer confidence. The University of Michigan's preliminary index of consumer sentiment, which may not reflect a recent run-up in oil, increased to 93.4 this month from 91.5 in December. Economists in a Bloomberg News survey expected 92.5.
Google shares headed for their biggest weekly decline since they were first sold to the public in August 2004. The most-used Internet search engine was sued by the U.S. Justice Department to hand over customer information, while this week's results from Yahoo spurred concern that search-engine sales growth is slowing. Google fell $37.49 to $398.96, bringing the weekly loss to 15 percent.
Xilinx Inc. slid $2.40 to $27.39. The world's largest maker of programmable computer chips said fourth-quarter sales will rise. Revenue will rise 1 percent to 5 percent from the third period. That equates to $454.1 million to $472.1 million and compares with the average analyst estimate of $463 million in a Thomson survey.
Semiconductor Stocks
Semiconductor stocks tumbled on results from Xilinx and Infineon Technologies AG, Europe's largest chipmaker, which reported a bigger-than-expected quarterly loss. U.S. shares of Infineon dropped 48 cents to $9.23. A gauge of chipmakers plunged 3.3 percent, for the steepest decline among the S&P 500's two dozen industry groups.
Johnson Controls Inc. fell $5.27 to $67.28. The world's largest maker of automotive seats said it expects fiscal second- quarter profit, excluding some items, of 92 cents to 94 cents. That would be less than the estimate of 95 cents in a Thomson survey.
Schlumberger Ltd. gained $7.14 to $122.01. The world's largest oilfield-services provider by market value said fourth- quarter profit rose to $1.08 per share. Analysts in a Thomson survey expected 96 cents. Halliburton Co., the world's largest oilfield-services company, added $3.47 to $75.22.
BlackRock
Shares of BlackRock Inc., which is majority owned by PNC Financial Group Inc., rallied $7.82 to $127.17. Cable-television network CNBC reported that Morgan Stanley may buy control of the New York-based money manager for about $8 billion. PNC shares added $2.29 to $65.96.
James Badenhausen, a spokesman for New York-based Morgan Stanley, BlackRock spokeswoman Kathleen Baum and PNC spokesman Brian Goerke declined to comment.
Ford Motor Co. slid 29 cents to $7.93. The world's third- biggest automaker will eliminate 25,000 or more jobs in the next four years to try and stem North American losses, according to people familiar with the organization.
To contact the reporter on this story:
Ari Levy in New York at Alevy5@bloomberg.net.
Last Updated: January 20, 2006 15:51 EST |
