U.S. Stocks Fluctuate

U.S. Stocks Fluctuate as Shares of Commodity Producers Retreat

By Rita Nazareth

U.S. stocks drifted between gains and losses as shares of mining and energy companies fell after commodity prices erased earlier gains, wiping out an early advance triggered by a drop in jobless claims.

Exxon Mobil Corp. and Freeport-McMoRan Copper & Gold Inc. paced losses in commodity producers as a rebound in the dollar from its weakest level of the day weighed on crude oil and metals prices. Marriott International Inc. slumped 4.7 percent after the largest U.S. hotel chain missed earnings projections. Abercrombie & Fitch Co. surged 11 percent as the clothing retailer reported faster sales growth than analysts estimated.

The S&P 500 slipped 0.2 percent to 1,158.22 at 11:05 a.m. in New York after earlier climbing as much as 0.3 percent. The index slipped yesterday after closing at the highest level in almost five months on Oct. 5. The Dow lost 15.19 points, or 0.1 percent, to 10,951.48.

“The market is vulnerable,” said Alan Gayle, senior investment strategist at RidgeWorth Capital Management in Richmond, Virginia, which oversees $63 billion. “The jobless claims figures were good but those figures are far from showing that companies are starting to hire. Commodities prices reversed earlier gains and that’s taking the market lower. Investors will need to get more data, like the jobs report tomorrow and companies’ guidance, to get the rally going.”

The S&P 500 had declined as much as 16 percent from this year’s high in April on concern that American unemployment and widening budget deficits in Europe will derail global growth. The gauge rose 13 percent since July 2 after the drop pushed the index’s valuation to about 12.2 times estimated profits for the next year, near the lowest since March 2009.

Jobless Claims

Equity futures gained in early trading after a Labor Department report showed that initial jobless claims dropped by 11,000 to 445,000 in the week ended Oct. 2, the fewest since July 10. Economists projected 455,000 new claims last week, according to the median forecast in a Bloomberg News survey. The total number of people receiving unemployment insurance decreased and those getting extended payments jumped.

“Today’s reaction so far has been confusion or differing opinions over the currency moves,” said Timothy Ghriskey, chief investment officer at Solaris Asset Management in Bedford Hills, New York, which manages $2 billion. “There isn’t a united consensus over what a weaker dollar means or what a stronger dollar means.”

Commodities

Gauges of energy and raw-materials producers fell as much as 0.5 percent. Commodities prices reversed gains as the U.S. dollar pared a decline of as much as 0.6 percent against a basket of major currencies.

The euro appreciated to $1.40 for the first time since February as European Central Bank President Jean-Claude Trichet said exchange rates should reflect economic fundamentals. Trichet said at a press conference in Frankfurt that rates are “appropriate” and the recovery “should proceed at a moderate pace.” He also said he supports a “strong dollar” and opposes “disorderly” shifts in global exchange rates.

Marriott slumped 4.7 percent to $36.07. The largest U.S. hotel chain reported third-quarter profit of 22 cents a share, trailing the average analyst estimate by 1 cent.

PepsiCo Inc. declined 3.5 percent to $65.75. The world’s largest snack-food producer said its full-year per-share earnings will rise as much as 11 percent, less than a prior forecast of up to 12 percent. The company reported third-quarter per-share earnings of $1.22, matching the average earnings estimate of analysts surveyed by Bloomberg.

Earnings Season

Alcoa increased 0.4 percent to $12.43. The U.S.’s largest aluminum producer will today report earnings excluding some items of 5 cents a share, according to the average estimate of 16 analysts surveyed by Bloomberg. The company posted a 7-cent per-share profit a year earlier.

Third-quarter earnings at S&P 500 companies are expected to grow 23 percent from a year earlier, according to a Bloomberg survey. Analysts surveyed see a 35 percent advance in earnings this year compared with 2009.

Some retailers gained after reporting September sales.

Abercrombie & Fitch rallied 11 percent to $42.70. The teen clothing retailer said September same-store sales rose 13 percent, compared with a Retail Metrics estimate of a 3.6 percent advance.

“We got some pretty good numbers from retailers,” said Philip Orlando, the New York-based chief equity market strategist at Federated Investors Inc., which manages about $350 billion. “That tells me that both GDP and corporate earnings will be strong. I see the S&P 500 rallying 10 percent or so between now and the end of the year.”