U.S. Stocks Fluctuate on Earnings

U.S. Stocks Fluctuate on Earnings, Forecasts Before GDP Data

By Rita Nazareth

July 29 (Bloomberg) -- U.S. stocks fluctuated as earnings and forecasts that disappointed investors at technology and consumer-staples companies wiped out most of an early advance as investors waited for tomorrow’s data on economic growth.

Akamai Technologies Inc. slid 12 percent after saying its profit margin shrank, while Nvidia Corp. and Symantec Corp. lost more than 9 percent after issuing forecasts. Colgate-Palmolive Co. sank 7.4 percent as sales trailed estimates. Ameriprise Financial Inc. led financial shares higher after the wealth management company reported better-than-estimated results, while Microsoft Corp. climbed as fund manager Donald Yacktman recommended the shares.

The S&P 500 was little changed at 1,106.13 at 3:14 p.m. in New York after climbing as much as 0.9 percent and dropping as much as 1.2 percent. The Dow Jones Industrial Average slipped 14.46 points, or 0.1 percent, to 10,512.34.

“The picture remains mixed,” said Keith Wirtz, who oversees $18 billion as chief investment officer at Fifth Third Asset Management Inc. in Cincinnati. “We’ll probably see this give and take during the summer because the liquidity is not normal. The employment conditions remain challenging. Good earnings results are not helping stock prices much. However, when you have bad numbers, stocks get killed.”

The S&P 500 fell the previous two days after consumer confidence slumped more than forecast, orders for durable goods unexpectedly decreased and the Federal Reserve said economic growth slowed in some areas. The gauge has climbed 7.4 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.

GDP Report

A Commerce Department report tomorrow may show U.S. growth slowed to 2.6 percent in the second quarter, from 2.7 percent in the first, based on the median forecast of economists in a Bloomberg survey.

Akamai Technologies sank 12 percent to $38.74. 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 9.1 percent to $9.21. 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, LSI

Symantec fell 10 percent to $13.21. 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.

“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.”

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 7.4 percent to $77.66.

Ameriprise Rallies

Ameriprise rose 12 percent to $42.99. The Minneapolis-based wealth management and insurance firm reported second-quarter profit excluding some items of $1.10 a share, beating the average analyst estimate by 44 percent.

Visa Inc. declined 5 percent to $71.45. The Department of Justice has indicated that it is considering filing a civil lawsuit, Chief Executive Officer Joseph W. Saunders said yesterday in a conference call with analysts after San Francisco-based Visa reported fiscal third-quarter results.

Federal Reserve Bank of St. Louis President James Bullard said the central bank should resume purchases of Treasury securities if the economy slows and prices fall rather than maintain a pledge to keep rates near zero. Bullard, a voting member of the Federal Open Market Committee this year, said using Fed communications to pledge rates will stay near zero may prove to be detrimental.

UBS Downgrades U.S.

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.”

Stocks rose earlier today after the Labor Department reported that the number of Americans filing first-time claims for unemployment insurance fell to 457,000 last week, less than the median estimate in a Bloomberg survey of economists.

“The economy is recovering very slowly even as profits rebound very fast,” said David Kelly, who helps oversee $445 billion as chief market strategist for JPMorgan Funds in New York. “Today’s jobless claims were slightly better-than- expected, but I don’t think it really changes the story. The employment rebound is still slow.”

Microsoft had the biggest gain in the Dow average, rising 1.5 percent to $26.33. The world’s largest software maker is “dirt-cheap,” Donald Yacktman, whose $2.3 billion Yacktman Fund has outperformed 97 percent of funds with similar objectives over the past five years, told Bloomberg Television. The investor also said he likes shares of Viacom Inc. and ConocoPhillips.

Citrix Systems Inc. surged 21 percent, the biggest gain in the S&P 500, to $57.21. The maker of networking software was raised to “outperform” from “neutral” at Robert Baird & Co. Inc and to “neutral” from “underperform” at Cowen & Co. LLC.