By Nikolaj Gammeltoft
Jan. 20 (Bloomberg) -- U.S. stocks slid, pulling the Standard & Poor’s 500 Index down from a 15-month high, on disappointing results at International Business Machines Corp. and Morgan Stanley and China’s move to curb bank lending.
IBM declined 2.6 percent after reporting a decrease in fourth-quarter business-consulting revenue, while Morgan Stanley retreated after earnings missed analysts’ estimates on a decline in trading revenue. Coach Inc. dropped 5.2 percent as North American sales trailed analysts’ estimates. Aetna Inc. climbed after Republicans won a Senate seat in Massachusetts, imperiling a health-care overhaul in Congress.
The Standard & Poor’s 500 Index slipped 1.1 percent to 1,138.17 at 9:48 a.m. in New York. The Dow Jones Industrial Average dropped 1.2 percent to 10,597.26 and The Nasdaq Composite lost 1 percent to 2,297.31.
“I’m concerned we might have a mild short-term correction,” said Bruce Bittles, chief investment strategist at Robert W. Baird & Co. in Nashville, Tennessee, which manages $18 billion. “Market optimism looks excessive, people are optimistic about fourth-quarter earnings which really haven’t materialized. All of that complacency isn’t good.”
More than 60 companies in the S&P 500 are scheduled to report quarterly results this week. The benchmark index is valued at 25 times its companies’ profits, the highest level since 2002, following a 70 percent jump since March. Stocks fell in Asia and Europe today after Chinese regulators told some of the nation’s banks to limit lending.
China Curbs Lending
China will restrict overall credit growth in the nation to 7.5 trillion yuan ($1.1 trillion) this year, banking regulator Liu Mingkang said. Some lenders were asked to rein in credit because they failed to meet regulatory requirements including those for capital, Liu, chairman of the China Banking Regulatory Commission, said in an interview today in Hong Kong. New loans in the first 10 days of this year were “relatively high,” he told the Asian Financial Forum.
“Expect earnings to grab the headlines today, but the focus is also on what China is doing,” said Angus Campbell, head of sales at Capital Spreads in London. “It looks like the Chinese are starting to place some constraints on liquidity, which may put a cap on their expanding economy but also have a larger effect on global growth.”
Morgan Stanley, IBM
Morgan Stanley lost 1.8 percent to $30.59. The world’s biggest brokerage said earnings from continuing operations were $413 million, or 14 cents per share. The average estimate of 22 analysts surveyed by Bloomberg was for earnings per share of 42 cents, with predictions ranging from 14 cents to 72 cents.
Coach, the largest U.S. maker of luxury leather handbags, declined 5.2 percent to $35.50 after North American sales in the second quarter trailed some analysts’ estimates and department- store sales fell.
IBM declined 2.6 percent to $130.60. The world’s largest computer-services company reported after U.S. trading ended yesterday that fourth-quarter business-consulting revenue declined while saying 2010 profit will top its earlier target.
Sales of business services, which include consulting, fell 2.8 percent to $4.58 billion, the company said. Profit in 2010 will be at least $11 a share. IBM set a goal in May 2007 for earnings of $10 to $11 this year.
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