U.S. Stocks Fluctuate on Consumer Confidence

U.S. Stocks Fluctuate on Consumer Confidence, Corporate Profits

By Rita Nazareth and Adam Haigh

July 27 (Bloomberg) -- U.S. stocks swung between gains and losses as consumer confidence unexpectedly fell to a five-month low while companies from DuPont Co. to Lexmark International Inc. rallied after beating profit estimates.

DuPont, the third-biggest U.S. chemical maker, gained 3.9 percent after raising its 2010 profit estimate. Best Buy Co. and Urban Outfitters Inc. retreated more than 2 percent as consumer confidence trailed the median economist estimate. Lexmark, the maker of laser and inkjet printers, surged 11 percent as improving equipment and service sales boosted results.

The Standard & Poor’s 500 Index rose 0.1 percent to 1,116.36 at 10:29 a.m. in New York after climbing as much as 0.5 percent earlier. The gauge exceeded its 2009 closing level of 1,115.10. The Dow Jones Industrial Average climbed 18.85 points, or 0.2 percent, to 10,544.28. About four stocks advanced for every three that declined on U.S. exchanges.

“It’s a disappointment,” said John Carey, Boston-based money-manager at Pioneer Investment Management, which oversees more than $200 billion, referring to the consumer-confidence report. “Consumer is an important part of the economy. We need to see consumers spending to get corporate revenue growth that would boost earnings and stocks. We’re looking at fairly good profits, but we need to see real sales rebound.”

Dow’s 2010 Loss

The Dow average erased its 2010 loss yesterday and the S&P 500 closed above its 200-day average, spurring optimism among chart analysts and investors who track earnings. The S&P 500 fell less than 0.1 percent this year through yesterday. Projections for the fastest S&P 500 income growth since 1988 are helping investors overcome concern that the economy will sink into its second recession in three years.

Of the 179 companies in the S&P 500 that reported results since July 12, about 82 percent have beaten the average analyst profit forecast and earnings per share have grown 61 percent, according to Bloomberg data.

DuPont climbed 3.9 percent to $40.49 after saying it will earn $2.90 to $3.50 a share for the year before some items. The company previously had called for profit of $2.50 to $2.70 a share. DuPont reported second-quarter profit of $1.17 a share. Analysts surveyed by Bloomberg had estimated profit of 94 cents on average.

Consumer Confidence

Stocks pared gains after a report showed confidence among U.S. consumers declined in July, a sign the lack of jobs will limit the economy’s recovery. The Conference Board’s confidence index fell to 50.4 from a revised 54.3 in June, figures from the New York-based private research group showed today. The gauge was forecast to drop to 51, according the median estimate in a Bloomberg News survey.

Consumer-discretionary shares fell the most of 10 industry groups in the S&P 500 after the confidence report. Best Buy declined 2.3 percent to $36.04, while Urban Outfitters retreated 2.2 percent to $33.87.

Bank of America climbed 0.9 percent to $14.28. Citigroup gained 1.2 percent to $4.20.

UBS reported net income of 2.01 billion Swiss francs ($1.91 billion), beating the 1.12 billion-franc median estimate of 11 analysts surveyed by Bloomberg News. Deutsche Bank said second- quarter net income increased 6.4 percent to 1.16 billion euros ($1.5 billion), topping the average analyst estimate of 1.05 billion euros.

Softened Banking Rules

Banks also gained after the Basel Committee on Banking Supervision yesterday softened some of its proposed capital and liquidity rules while introducing new restrictions on how much lenders can borrow in order to rein in their risk-taking.

The panel agreed to allow certain assets, including minority stakes in other financial firms, to count as capital. The committee set a leverage ratio to apply to banks globally for the first time, which could become binding by 2018, pending further adjustments to the method of calculating banks’ assets.

Home prices in 20 U.S. cities rose in May from a year earlier more than forecast as a government tax credit temporarily underpinned sales. The S&P/Case-Shiller index of property values increased 4.6 percent from May 2009, the biggest year-over-year gain since August 2006, the group said today in New York.

Lexmark International Inc. surged 11 percent to $38.48. The maker of laser and inkjet printers posted second-quarter revenue and profit that topped analysts’ estimates on improving equipment and services sales. Profit excluding some items was $1.23 a share, exceeding the 93-cent average of analysts’ estimates compiled by Bloomberg.

Fluor Corp. gained 2.9 percent to $49.25. The largest publicly traded engineering and construction company in the U.S. may reach a record backlog of projects this year on energy industry demand, Chief Operating Officer David Seaton said. The company reported second-quarter profit that beat analysts’ estimates.

Rambus Inc. advanced 5.1 percent to $20.59. The seller of technology used in computer memory won its patent-infringement fight against Nvidia Corp. over imports of computer-graphics chips. Nvidia fell 1.2 percent to $10.43.