STOCKS in the US slipped in light trading yesterday, weighed down by weak economic data from Asia and signs of economic trouble in Europe, underscored by higher Spanish and Italian bond yields.
Yesterday’s decline, the third in a row for the S&P 500 index, comes as quarterly earnings reports get under way. Investors are anxious to see what impact weak demand in Europe and slowing growth in Asia have had on corporate America.
“We think 2Q earnings for the S&P 500 will be OK this quarter ... we’re calling for a small two per cent beat. That said, we expect the tone of earnings season to be quite negative,” said Jonathan Golub, chief strategist at UBS in New York.
Stocks pared losses late in the session, leaving indexes with just slight losses.
Alcoa stock fluctuated throughout the day, ending up 0.3 per cent at $8.76 in the regular session. Alcoa’s shares rose two per cent in extended trading after the largest US aluminum company and Dow component released its results, marking the start of the earnings season.
Corporate outlooks are at their most negative in nearly four years, and companies that have already reported have shown lackluster growth. Nearly two dozen S&P firms have already cited Europe’s woes – which seem to be worsening – as a concern.
While a majority of corporations may beat lowered analyst expectations, investors will be focused on how well companies are handling weakness overseas.
Based on “where we are today, we may see muted to a slightly downward reaction to earnings,” said Natalie Trunow, chief investment officer of equities at Calvert Investment Management in Bethesda, Maryland, whose firm manages about $13bn in assets.
The Dow Jones industrial average ended down 36.18 points, or 0.28 per cent, at 12,736.29. The Standard & Poor’s 500 Index was down 2.22 points, or 0.16 per cent, at 1,352.46. The Nasdaq Composite Index was down 5.56 points, or 0.19 per cent, at 2,931.77.
Volume was among the lightest of the year. About 5.1bn shares changed hands on the New York Stock Exchange, the Nasdaq and Amex, compared with the year-to-date daily average of 6.85bn shares.
Among the day’s decliners, Visa shares fell 1.3 per cent to $123.65 and MasterCard shares lost 2.3 per cent to $431.27.
On a positive note, Amerigroup jumped 38 per cent to $88.80 after the company agreed to be acquired by rival WellPoint for about $4.46bn. WellPoint shares advanced 3.4 per cent to $61.95.
Health insurer Wellcare Health Plans surged 18.4 per cent to $62.56 and the Morgan Stanley healthcare payor index climbed 10.1 per cent.