The Joplin Globe, Joplin, MO

October 22, 2012

Markets are weighed down by disappointing earnings

From The Associated Press

NEW YORK — The stock market wavered Monday morning, switching between small gains and losses. Investors are sitting on their hands until earnings season and the presidential election are over.

The Dow Jones industrial average and the Standard & Poor’s 500 dipped when the market first opened, then wavered in midmorning trading.

The Dow was down 19 points to 13,324 after the first hour of trading. The S&P 500 was down two at 1,431 and the Nasdaq composite index inched up two points to 3,008.

Trading was light, and the developments that could move the market are happening later this week. Yahoo will report earnings after the market closes this afternoon. Bellwether companies like Apple and Procter & Gamble report earnings later this week. The government releases its report on third-quarter economic growth on Friday. And two weeks from now, the U.S. holds its presidential election.

“It’s very quiet out there,” said David Katz, principal and senior portfolio strategist at WeiserMazars Wealth Advisors in New York. “A lot of that is just the election, or Monday night football — one or the other.”

The markets just got through the first peak week of third-quarter earnings reports. On Friday, disappointing results from Microsoft, General Electric and McDonald’s surprised traders and pushed U.S. stocks lower.  

Monday, company earnings again signaled that the economy isn’t at full bore, though investors’ reactions were mixed.

Hasbro, the toymaker behind brands like My Little Pony and Transformers, said that sales for boys and preschool were less than it had hoped. But the company’s results beat analysts’ expectations, and the stock inched up 6 cents to $39.11.

Clothing maker VF Corp., whose brands include The North Face and Wrangler, slipped after its revenue fell short of analysts’ estimates. The stock fell $5.14 to $161.63

Caterpillar, the world’s largest construction and mining equipment company, cut its profit and revenue predictions for the year, saying the global economy is weaker than it previously thought. But profit and revenue both increased, and the stock rose $1.10 to $84.96.

While most companies have pulled in better-than-expected earnings, investors now are more interested in how they’re doing on revenue. Revenue can give a more accurate picture of how a company is performing, because earnings can vary widely on items like accounting charges and cost cutting.

Katz described companies’ third-quarter revenue results as “fair” and said the U.S. economy is “slow and steady.”

“It is at a snail’s pace,” he said. “But it’s certainly better than what we had.”

Of the roughly 100 companies that have reported earnings so far, 70 percent have recorded earnings above the mean estimate, according to John Butters, senior earnings analyst at FactSet. But only 42 percent have reported revenue that beat the mean estimate. That’s the lowest since the first quarter of 2009, when the stock market hit its Great Recession lows.