U.S. Stocks Drop as S&P 500 Slumps

U.S. Stocks Drop as S&P 500 Slumps for Third Day Led By Tech

By Rita Nazareth

July 29 (Bloomberg) -- U.S. stocks fell, sending the Standard & Poor’s 500 Index lower for a third day, as earnings and forecasts that disappointed investors at technology and consumer-staples companies wiped out an early advance.

Akamai Technologies Inc. slid 11 percent after saying its profit margin shrank, while Nvidia Corp. and Symantec Corp. lost more than 9.9 percent after issuing forecasts. Colgate-Palmolive Co. sank 8.6 as its sales missed analyst estimates. Financial shares erased gains as New York Attorney General Andrew M. Cuomo said his office served subpoenas on Prudential Financial Inc. and MetLife Inc. in a probe of military life insurance.

The S&P 500 lost 0.9 percent to 1,096 at 12:16 p.m. in New York after climbing as much as 0.9 percent earlier. The Dow Jones Industrial Average sank 77.50 points, or 0.7 percent, to 10,420.38. Three stocks fell for each that rose on U.S. exchanges.

“Tech is not doing great and that’s enough to drag the index,” said Michael Mullaney, who manages $9 billion at Fiduciary Trust Co. in Boston. “We need to get a better economic picture in order to get a sustainable stocks rally. We need to get job creation and the consumer back on board”

The S&P 500 has fallen 1.7 percent over the past three days after orders for durable goods unexpectedly decreased and the Federal Reserve said economic growth slowed in some areas. The gauge has climbed 6.2 percent in July, headed for its best monthly advance in a year, after earnings topped estimates at about 78 percent of its companies that have reported second- quarter results so far.

Technology Shares Slump

Akamai Technologies sank 11 percent to $38.97. The largest supplier of software to make websites and digital media load faster said its profit margin shrank as it added business from customers like Netflix Inc. at lower prices.

Nvidia slumped 9.9 percent to $9.13. The second-largest maker of graphics chips lowered its second-quarter sales forecast to a range between $800 million to $820 million. That compares with a prediction of $950 million to $970 million given May 13. Analysts had projected sales of $944.7 million, according to the average from a Bloomberg survey.

Symantec fell 11 percent to $13.02. The world’s largest maker of computer security software forecast second-quarter sales and profit that missed analysts’ estimates, citing weakness in the euro and “cautiousness” among customers.

LSI Corp. had the biggest decline in the S&P 500, falling 13 percent to $4.12. The maker of chips used in computer disk drives said third-quarter sales will be between $625 million and $655 million. That compares with the $694.9 million average of estimates compiled by Bloomberg.

Colgate

Colgate-Palmolive led a gauge of consumer staples stocks to the second-biggest decline among 10 industries in the S&P 500. The world’s largest toothpaste maker reported second-quarter sales of $3.81 billion, missing the average analyst estimate in a Bloomberg survey of $3.94 billion. Colgate slumped 8.6 percent to $76.67.

Kraft Foods Inc., the world’s biggest confectioner, and Procter & Gamble Co., the world’s largest consumer-products company, dropped at least 2.2 percent.

U.S. and Japanese stocks were cut and European shares were raised by UBS AG global strategists, who said there is less risk and economic data is more supportive in Europe.

U.S. shares were cut to “neutral” and Japanese equities were lowered to “underweight,” according to a report by strategist Jeffrey Palma to clients dated July 28. Both regions were previously rated “overweight.”

Materials Shares

The broker raised its stance on materials’ shares to “overweight” from “‘neutral” in its global strategy portfolio recommendations and lowered health care to “neutral” from “overweight.”

Stocks rose earlier today on better-than-estimated earnings at companies from Exxon Mobil Corp. to Goodyear Tire & Rubber Co. and a drop in unemployment claims.

Initial jobless claims decreased by 11,000 to 457,000 last week, 3,000 fewer than the median economist estimate in a Bloomberg survey.

Genzyme Corp. gained 3.1 percent to $70.08. Sanofi-Aventis Chief Executive Officer Chris Viehbacher has support from his board of directors to offer as much as $70 a share for the drugmaker, or about $18.7 billion, said three people with knowledge of the situation. The Paris-based company may offer less than $70 a share in the letter, two of the people said.