Profit data disappoint
Stocks pulled back Tuesday, with the Dow Jones industrials tumbling more than 100 points as a rush of quarterly results from bellwethers such as AT&T;, DuPont and McDonald’s failed to impress investors.
Oil prices also reached fresh highs, raising concern about inflation.
AT&T;’s earnings met Wall Street’s forecast while McDonald’s and DuPont reported stronger-than-expected numbers.
But DuPont said a U.S. slowdown would offset growth abroad and McDonald’s said an important metric of its sales declined for March. All three companies are among the 30 stocks that make up the Dow.
The comments gave trading a cautious tone.
With hundreds of companies still to report results, investors are anxious over what the figures might say about the prospects for the economy.
“We’ve melted here, but it isn’t a plunge,” said Art Hogan, chief market analyst at Jefferies & Co.
“We’re in a day-to-day assessment of how good earnings season is, and right now there’s more bad news than good news -- the parade has been less positive than we’ve anticipated.”
Investors appeared little moved by news of continued weakness in the housing sector. Sales of existing homes fell 2% in March to a seasonally adjusted annual rate of 4.93 million units, while the median sale price dropped for a seventh straight month.
The National Assn. of Realtors also said sales rose in the Northeast and West but fell in the Midwest and South.
Oil’s seemingly relentless march higher this year raises the specter of higher inflation that would lead consumers to cut back their discretionary spending.
It would also make the Federal Reserve less likely to keep lowering interest rates.
Light, sweet crude for May delivery rose as high as $119.90 a barrel, then slipped back to settle at $119.37, up $1.89. But it appeared inevitable that crude would pass $120.
The Dow fell 104.79 points, or 0.8%, to 12,720.23.
Broader stock indicators also declined. The Standard & Poor’s 500 index fell 12.23 points, or 0.9%, to 1,375.94, and the Nasdaq composite index fell 31.10 points, or 1.3%, to 2,376.94. The Russell 2,000 index of smaller companies dropped 14.29 points, or 2%, to 703.71.
Declining issues outnumbered advancers by about 3 to 1 on the New York Stock Exchange.
Bond prices edged up. The yield on the benchmark 10-year Treasury note, which moves opposite its price, fell to 3.69% from 3.73% late Monday.
The dollar was mixed against other major currencies, with the euro rising 0.008 to $1.600 against the dollar.
Gold prices rose $7.60 to $922.30 an ounce.
Some of the latest earnings reports appeared to confirm concerns about the economy, analysts said.
“It takes a while for the economy’s situation to work its way down to the companies,” said Alexander Paris, an economist for Barrington Research. “What’s going on is earnings are reflecting the reality of a slowing economy, and that should go on until the second half of the year.”
Late Monday, Texas Instruments warned of a weak market for the chips it makes for high-end mobile phones. The company’s results were nearly in line with Wall Street’s expectations, however. The stock fell $1.77, or 5.8%, to $28.82.
In other corporate news, CIT Group fell $1.99, or 15.6%, to $10.75 after the financial services company said it would raise $1.5 billion from an offering of common and preferred stock. The company has been hit by strains in the mortgage and credit markets.
AT&T; rose 22 cents to $37.81 after reporting that its first-quarter earnings rose 22% amid growth in the company’s wireless division and as its enterprise services business reversed an earlier decline.
DuPont said profit jumped 26% as the chemical company saw higher sales and benefits from the weak dollar.
But the company’s comments about the U.S. market appeared to weigh on the stock, which fell $2.09, or 4%, to $50.16.
McDonald’s slipped 32 cents to $58.35 after saying its first-quarter earnings grew 24%.
The fast-food chain benefited from the weak dollar and strong global sales. However, it also said its same-store sales, or sales at restaurants open at least a year, declined in March.
The rising price of oil again sent energy stocks higher. Exxon Mobil rose 13 cents to $94.39, and Chevron rose $1.33 to $94.03.
Overseas, Japan’s Nikkei stock average fell 1.1%. Britain’s FTSE 100 fell 0.3%, Germany’s DAX index declined 0.9% and France’s CAC-40 lost 0.8%.
