U.S. Stocks Fluctuate

U.S. Stocks Fluctuate After Economic Reports; Merck Shares Fall

By Rita Nazareth

July 30 (Bloomberg) -- U.S. stocks swung between gains and losses as the Standard & Poor’s 500 Index headed for a weekly decline after improving data on consumer confidence and business activity tempered concern the economic rebound is slowing.

Merck & Co. lost 2.2 percent, the most in the Dow Jones Industrial Average, after revenue at the drugmaker missed the average analyst estimate. MEMC Electronic Materials Inc. sank 17 percent after the maker of silicon wafers reported less profit than forecast. MetLife Inc. climbed 4.1 percent as the biggest U.S. life insurer topped income projections.

The S&P 500 fell 0.1 percent to 1,100.37 at 12:51 p.m. New York time, leaving it down 0.2 percent for the week, after the expansion in U.S. gross domestic product trailed economists’ forecasts. The Dow retreated 12.95 points, or 0.1 percent, to 10,454.21. Equities pared losses after reports on consumer sentiment and business activity.

“The top-line GDP number was disappointing,” said Paul Zemsky, the New York-based head of asset allocation for ING Investment Management, which oversees $550 billion. “On the other hand, corporate earnings are pretty good and companies feel good about it because they’re building new plants and investing in equipment. There’s also reason to be optimistic.”

The S&P 500 has climbed 6.8 percent in July, the biggest monthly advance in a year, after more than 77 percent of companies in the index exceeded the average analyst profit estimate since July 12, data compiled by Bloomberg show. Earnings will rise 35 percent for the entire measure this year, the most since 1988, analyst forecasts show. Following the 2001 recession, income growth never exceeded 20 percent.

Economic Growth

The S&P 500 fell as much as 1.2 percent today after a report showed growth in the U.S. economy slowed to a 2.4 percent annual rate in the second quarter, less than the 2.6 percent median forecast in a Bloomberg survey of economists, reflecting a larger trade deficit and cooler consumer spending.

“The memories of a bear market linger for a very long time,” Dennis Gartman, an economist and the editor of the Suffolk, Virginia-based Gartman Letter, said today in a Bloomberg radio interview. “We still have 9 percent-plus unemployment. I have my doubts whether consumer spending is going to pick up here at all.”

Stocks trimmed losses after the Thomson Reuters/University of Michigan final index of consumer sentiment showed a decline to 67.8 in July from 76 a month earlier. The index was forecast to drop to 67 from the previous month, according to a Bloomberg News survey. Separately, the Institute for Supply Management- Chicago Inc. said today its business barometer rose to 62.3 this month, more than the median forecast of economists surveyed.

‘Enough Growth’

“There’s enough economic growth and solid earnings to boost stocks,” said Michael Strauss, who helps oversee about $25 billion at Commonfund in Wilton, Connecticut. “The manufacturing sector is showing a lot of strength. The risks of a double-dip are very low.”

Merck fell 2.2 percent to $34.28 after second-quarter revenue and sales of its diabetes treatment Januvia missed analysts’ estimates.

MEMC Electronic Materials declined 17 percent to $9.40. The maker of silicon wafers for solar modules and semiconductors reported second-quarter profit excluding some items of 2 cents a share, trailing the average analyst estimate by 77 percent, according to Bloomberg data.

Genworth

Genworth Financial Inc., the mortgage guarantor and life insurer, slumped 15 percent to $13.48. Revenue in the second quarter totaled $2.4 billion, compared with $2.48 billion in the year-earlier period. Net investment losses widened to $76 million from $59 million. New York Attorney General Andrew Cuomo subpoenaed Genworth as the state widens a life-insurance fraud probe, said a person briefed on the demands.

MetLife rose 4.1 percent to $41.86. The biggest U.S. life insurer swung to a second-quarter profit as revenue improved and the company booked an investment gain on derivatives.

Eastman Chemical Co., the biggest U.S. maker of plastics for water bottles, gained 3.3 percent to $61.74. Second-quarter profit excluding some items was $2.05 a share and 2010 earnings will be $6.20 to $6.40 a share. Profit was projected to be $1.65 a share in the second quarter, according to the average estimate of 10 analysts surveyed by Bloomberg, and $5.41 for the year.

Franklin Resources Inc., manager of the Franklin and Templeton mutual funds, rose 1.6 percent to $101.41. The stock was upgraded to “Outperform” from “Underperform” at Credit Agricole Securities by analyst Christopher Spahr, who estimates the shares may reach $112 in the next 12 months.