Shares ease as weakness in FedEx grounds transports
Stocks edged lower Wednesday in light trading as a disappointing outlook from FedEx pulled down transport stocks and offset the positive influence of the latest round of proposed takeovers.
Oil prices rose to a three-month high, heightening concern that energy costs may curb profit growth.
FedEx led declines among shippers and airlines after saying higher fuel expenses would hurt earnings this quarter.
Stocks erased initial gains tied to takeovers, including a $17.1-billion offer for Harrah’s Entertainment, the world’s largest casino company. A pickup in deal-making and a 19% drop in crude prices from this year’s record has helped the Standard & Poor’s 500 index rise every month since June.
“Oil is certainly back on the scene as a headwind for the stock market,” said John Augustine, who helps manage $22 billion as chief investment strategist at Fifth Third Asset Management in Cincinnati. “Given the strong run-up in stocks the last six months, today’s probably a well-warranted break.”
The Dow Jones industrial average fell 7.45 points, or 0.1%, to 12,463.87. The S&P; 500 index slipped 2.02 points, or 0.1%, to 1,423.53, and the Nasdaq composite index fell 1.94 points, or 0.1%, to 2,427.61.
Bond yields were little changed as investors awaited fresh economic data. The 10-year Treasury note rose to a yield of 4.60%, from 4.59% on Tuesday.
Oil climbed after a government report showed that U.S. inventories dropped more than expected and that imports fell, signaling that OPEC is following through on pledges to trim output. Crude oil futures rose 26 cents to $63.72 a barrel in New York.
In other market highlights:
* FedEx fell $2.15 to $111.85 after its fiscal third-quarter forecast came in below Wall Street expectations. The shipping company reported a 9% increase in second-quarter profit amid strong results from its ground delivery business.
“The weakness in FedEx is saying that the economy is continuing in a soft spot,” said Bruce Bittles, chief investment strategist at Robert W. Baird & Co. in Nashville. “Higher oil prices mean higher costs for the industry.”
Norfolk Southern fell $1.87 to $49.28 after Credit Suisse Group cut its profit forecast for the railroad.
* Harrah’s climbed 37 cents to $82.69 after accepting a $17.1-billion offer from private equity investors Apollo Management and Texas Pacific Group. Harrah’s said shareholders would receive $90 a share in cash.
* Used-car dealer CarMax rose $4.14, or 8.5%, to $52.77 after its third-quarter earnings nearly doubled on strong sales to the wholesale market and increased demand for trucks.
* Endeavor Acquisition soared for a second straight session after the holding company agreed to buy Los Angeles-based clothing maker American Apparel. The deal would make the now-private American Apparel a public firm. Endeavor shares, which jumped 15.2% on Tuesday, gained 61 cents, or 7%, to $9.31 on Wednesday.
* Nike shares rose $3.59 to $99.78 before the company reported that earnings rose 8% in its fiscal second quarter. In after-hours trading, however, Nike slipped to $98.27.
