Dow Slips on IBM, Caterpillar Earnings
Wall Street finished mixed Thursday as disappointing results from Dow components IBM and Caterpillar, and solid but not exceptional earnings at other companies, gave investors an excuse to shrug off a series of positive reports on the economy.
Analysts said investors who had sent stocks to 16-month highs in recent days on expectations of a strong earnings season needed more incentives to make big stock purchases.
“On balance, the earnings have been what Wall Street expected. That’s good, but not enough to get the market moving,” said Matt Brown, head of equity management at Wilmington Trust. “To get the market up, you need to see a lot of companies beat expectations. Maybe that will happen in the next quarter.”
The Dow Jones industrial average closed down 11.33 points, or 0.1%, at 9,791.72. The broader market finished higher, after some softness earlier in the day. The Nasdaq composite index rose 11.04 points, or 0.6%, to 1,950.14, its highest finish since Jan. 17, 2002. The Standard & Poor’s 500 index gained 3.31 points, or 0.3%, to 1,050.07. It was the highest close since May 31, 2002.
Winners led losers by 7 to 5 on the New York Stock Exchange and by 3 to 2 on Nasdaq in active trading.
Several economic reports signaled the economy is accelerating. The Federal Reserve Bank of Philadelphia said its index registered a better-than-expected 28, almost double September’s reading of 14.6. Numbers greater than zero show expansion.
It was the second positive report on manufacturing in two days. The Empire State factory survey released Wednesday said manufacturing in New York expanded to a record level in October.
Also, the Labor Department said Thursday that the number of Americans filing initial applications for unemployment benefits fell to 384,000 for the week ended Saturday, the lowest in eight months. And production at U.S. factories in September rose 0.7%, the most since April 2000 as automakers and other manufacturers responded to rising sales and falling inventories.
Finally, the Commerce Department reported Thursday that consumer prices rose by 0.3% in September. The reading was slightly stronger than the 0.2% rise analysts were expecting and should relieve some concerns about deflation, or a dangerous slide in prices, although it could fan fears about inflation.
“Economic numbers are starting to improve,” said Jeffrey Swensen, equity trader at John Hancock Advisers Inc. “We will see decent earnings. Stocks will drift higher for the rest of the year.”
Caterpillar fell $4.39 to $74.33, making it the biggest loser in the Dow. The world’s largest maker of earthmoving equipment said third-quarter earnings before items equaled 73 cents a share, a penny below the average analyst estimate in a Thomson Financial survey, even though revenue beat forecasts. Caterpillar’s shares reached an all-time high Wednesday.
IBM dropped $3.46 to $89.28 after the computer company reported earnings that met analysts’ forecasts; however, its revenue fell short of estimates.
Among other companies reporting earnings, Ford rose 20 cents to $12.34 after the automaker reported a narrower third-quarter loss, citing good results from its financial services arm. Coca-Cola fell 10 cents to $45 after reporting quarterly earnings that beat expectations.
Altria Group lost 20 cents to $44.95. The parent of cigarette maker Philip Morris said profit dropped 43%, the fourth consecutive quarterly decline, after the company cut prices and spent more on promotions.
Bond yields rose for a third day on the upbeat economic news. The yield on the benchmark 10-year Treasury note climbed to 4.46% from Wednesday’s close of 4.40%.
