US stocks fall over fears of commodity price rises

IN the lightest volume session of the year, US stocks fell yesterday after a lowered outlook from Kimberly-Clark increased concerns about higher commodity costs squeezing profits in coming quarters.

About 5.4bn shares traded on the New York Stock Exchange, the American Stock Exchange and Nasdaq, below the daily average of 7.74bn.

Kimberly-Clark fell 2.7 per cent to $64.24 after it cut the low end of its full-year outlook because the costs of pulp and other goods rose more than twice as much as it had expected.

The threat of rising commodity costs will remain in the spotlight for one of the busiest weeks of earnings, with 180 S&P 500 companies set to report this week, including other major consumer names like Procter & Gamble and Colgate-Palmolive.

“That is going to be the next thing that happens – the forward guidance is going to start to become impacted because of higher prices,” said Ken Polcari, managing director of ICAP Equities in New York.

“This non-existent inflation that (the Federal Reserve) keeps talking about is elusive, because there clearly is much more inflation than they care to admit at the moment.”

Kimberly-Clark, maker of Kleenex tissue and <a href=""; target="_blank">Huggies</a> disposable diapers, is among companies highly vulnerable to rising commodity costs because its products contain oil-based materials and paper.

The Dow Jones industrial average dropped 26.11 points, or 0.21 per cent, to end at 12,479.88. The Standard & Poor’s 500 Index shed 2.13 points, or 0.16 per cent, to 1,335.25. But the Nasdaq Composite Index gained 5.72 points, or 0.20 per cent, to close at 2,825.88.

Johnson Controls fell 2.8 per cent to $39.60 after the company, one of the world’s largest auto suppliers, said its fiscal third-quarter results would be hit by a drop in car production following Japan’s massive earthquake last month. Japan’s earthquake has disrupted the supply of auto parts and forced auto companies to idle plants.

Through Monday, 75 per cent of the 151 companies in the S&P 500 that have reported results have beaten analysts’ expectations. That is just above the average over the past four quarters but well above the average of 62 percent since 1994, according to Thomson Reuters data.

The Nasdaq edged higher, boosted by SanDisk, up 1.6 per cent at $49.78 after raising its 2011 margin outlook late on Thursday.