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Stocks weaken as IMF lowers estimate for US growth
Source: Agencies |
April 12, 2011, Tuesday
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STOCKS closed broadly lower yesterday in the final trading session before first-quarter earnings season gets under way.
Traders are concerned about the effect of higher oil and food costs on corporate margins. Stocks turned lower in afternoon trading after the International Monetary Fund said that higher gas prices could slow the pace of the US economy and offset the boost from the Federal Reserve's bond-buying stimulus program.
The Dow Jones industrial average added 1.06 point, or less than 0.1 percent, to close at 12,381.11. The broader S&P 500 index fell 3.71, or 0.3 percent, to 1,324.46. Energy companies fell 1.9 percent, the most of any of the 10 company groups that make up the index.
The Nasdaq composite lost 8.91, or 0.3 percent, to 2,771.51.
After the market closed, Alcoa Inc. reported a first-quarter profit on higher aluminum prices and sales, partially offset by a weaker dollar and higher energy and raw materials costs. The results fell short of expectations, sending the stock down 2.6 percent to US$17.31 in after-hours trading. Alcoa is traditionally the first of the 30 companies that make up the Dow average to report earnings each quarter.
Analysts have been hopeful that overall corporate earnings will come in ahead of expectations for the ninth consecutive quarter, but they still have a long list of worries including high oil prices and an aftershock that struck Japan on the one-month anniversary of the March 11 earthquake and tsunami disaster. It was the second major aftershock in less than a week to hit the country, which is the world's third-largest economy.
Much of the earnings growth for companies so far during the recovery has come from cutting jobs and other costs. Analysts say this quarter's earnings season will show more revenue growth.
More than 30 percent of companies could report revenue growth of at least 10 percent, according to S&P senior index analyst Howard Silverblatt. Analysts expect Alcoa, for example, to say its first-quarter revenue jumped 26 percent to US$6.16 billion from US$4.89 billion. The global economic recovery has meant more demand for Alcoa's aluminum.
Companies are also turning to deals to help them grow. Endo Pharmaceuticals agreed to buy American Medical Systems Inc. for about US$2.6 billion, a premium of 34 percent. Endo rose 0.5 percent to US$41.06, and American Medical jumped 32 percent to US$29.50.
Level 3 Communications rose 18 percent to US$1.70. The company agreed to buy Global Crossing Ltd., which jumped 69 percent to US$24.97. The all-stock transaction is valued at about US$1.9 billion.
Meanwhile the struggle to control NYSE Euronext Inc. escalated.
Nasdaq OMX Group Inc. and Intercontinental Exchange Inc. said their US$11.3 billion bid for the parent company of the New York Stock Exchange was rejected without any talks. NYSE Euronext said it was sticking by its US$10 billion deal to be acquired by Deutsche Boerse, a German exchange operator.
NYSE Euronext fell nearly 3 percent to US$37.59.
Two stocks fell for every one that rose on the New York Stock Exchange. Consolidated volume came to 3.5 billion shares.
Traders are concerned about the effect of higher oil and food costs on corporate margins. Stocks turned lower in afternoon trading after the International Monetary Fund said that higher gas prices could slow the pace of the US economy and offset the boost from the Federal Reserve's bond-buying stimulus program.
The Dow Jones industrial average added 1.06 point, or less than 0.1 percent, to close at 12,381.11. The broader S&P 500 index fell 3.71, or 0.3 percent, to 1,324.46. Energy companies fell 1.9 percent, the most of any of the 10 company groups that make up the index.
The Nasdaq composite lost 8.91, or 0.3 percent, to 2,771.51.
After the market closed, Alcoa Inc. reported a first-quarter profit on higher aluminum prices and sales, partially offset by a weaker dollar and higher energy and raw materials costs. The results fell short of expectations, sending the stock down 2.6 percent to US$17.31 in after-hours trading. Alcoa is traditionally the first of the 30 companies that make up the Dow average to report earnings each quarter.
Analysts have been hopeful that overall corporate earnings will come in ahead of expectations for the ninth consecutive quarter, but they still have a long list of worries including high oil prices and an aftershock that struck Japan on the one-month anniversary of the March 11 earthquake and tsunami disaster. It was the second major aftershock in less than a week to hit the country, which is the world's third-largest economy.
Much of the earnings growth for companies so far during the recovery has come from cutting jobs and other costs. Analysts say this quarter's earnings season will show more revenue growth.
More than 30 percent of companies could report revenue growth of at least 10 percent, according to S&P senior index analyst Howard Silverblatt. Analysts expect Alcoa, for example, to say its first-quarter revenue jumped 26 percent to US$6.16 billion from US$4.89 billion. The global economic recovery has meant more demand for Alcoa's aluminum.
Companies are also turning to deals to help them grow. Endo Pharmaceuticals agreed to buy American Medical Systems Inc. for about US$2.6 billion, a premium of 34 percent. Endo rose 0.5 percent to US$41.06, and American Medical jumped 32 percent to US$29.50.
Level 3 Communications rose 18 percent to US$1.70. The company agreed to buy Global Crossing Ltd., which jumped 69 percent to US$24.97. The all-stock transaction is valued at about US$1.9 billion.
Meanwhile the struggle to control NYSE Euronext Inc. escalated.
Nasdaq OMX Group Inc. and Intercontinental Exchange Inc. said their US$11.3 billion bid for the parent company of the New York Stock Exchange was rejected without any talks. NYSE Euronext said it was sticking by its US$10 billion deal to be acquired by Deutsche Boerse, a German exchange operator.
NYSE Euronext fell nearly 3 percent to US$37.59.
Two stocks fell for every one that rose on the New York Stock Exchange. Consolidated volume came to 3.5 billion shares.
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