U.S. stocks were little changed, with the Standard & Poor’s 500 Index on pace for a weekly decline, as investors watched economic and earnings reports.
Goodyear Tire & Rubber Co., the largest U.S. tiremaker, dropped 11 percent after reporting a profit that was below estimates. VeriSign Inc., an operator of Web domain name registries, tumbled 16 percent after saying regulators have delayed a review of the company’s contract for that business. Expedia Inc. surged 15 percent as the online travel agency reported third-quarter earnings that topped analysts’ estimates.
The S&P 500 fell 0.1 percent to 1,411.93 at 3:50 p.m. New York time, after dropping as much as 0.7 percent earlier. The Dow Jones Industrial Average added 1.92 points, or less than 0.1 percent, to 13,105.60. Trading in S&P 500 companies was 4.5 percent lower than the 30-day average at this time of day.
“You’re getting a mix of data that don’t have a clear direction,” said Stephen Wood, the New York-based chief market strategist for North America for Russell Investments, which oversees $152 billion. “It’s important for investors’ psychology to see GDP data beating estimates. Yet the earnings season has been a very challenging one.”
The benchmark measure for American equities is poised to snap a four-month rally amid concern about corporate profits. The S&P 500 has slumped 1.9 percent so far in October. Third- quarter earnings at 71 percent of the index’s companies beat estimates, according to data compiled by Bloomberg. Sales missed forecasts at 59 percent of companies, the data showed.
Economic Data
The economy in the U.S. expanded more than forecast in the third quarter, paced by a pickup in consumer spending, a rebound in government outlays and gains in residential construction. Separately, the Thomson Reuters/University of Michigan final index consumer sentiment for October increased to 82.6 from 78.3 the prior month. Economists projected 83 for the gauge after a preliminary October reading of 83.1, according to the median forecast of 60 economists surveyed by Bloomberg.
Concern about a worsening of Europe’s debt crisis grew after German Finance Minister Wolfgang Schaeuble reportedly said there are doubts on whether Greece will meet requirements for its European bailout.
“There’s still concern about Europe,” said Thomas Garcia, head of equity trading at Santa Fe, New Mexico-based Thornburg Investment Management Inc. His firm oversees about $80 billion. “You have Greek debt crisis, problems in Spain and other areas. The market is going to be back and forth until those guys get things figured out over there.”
Seven out of 10 groups in the S&P 500 advanced as financial, health-care and consumer-staple companies had the only losses.
Goodyear dropped 11 percent to $11. The company posted a quarterly adjusted profit of 53 cents a share. The average estimate of eight analysts surveyed by Bloomberg was for a profit of 59 cents. The results excluded one-time items, such as accelerated depreciation and pension settlements in the U.K.
CA Inc. dropped 8.7 percent to $22.73. The maker of software for managing information technology cut its fiscal 2013 revenue forecast, citing lower-than-expected new product sales amid a weaker global economy.
Deckers Outdoor Corp. tumbled 17 percent to $29.56 after cutting its forecast for annual sales growth by almost two- thirds amid declining demand for its UGG brand sheepskin boots.
VeriSign plunged 16 percent to $39.34. The company, which operates the registry for .com names, submitted the agreement to provide that service to the U.S. Commerce Department on June 26 and anticipated an approval by Nov. 30, according to a statement yesterday. The agency, which along with the U.S. Department of Justice, is reviewing the agreement and may not complete the review on time, the Reston, Virginia-based company said.
Dean Foods
Dean Foods Co. tumbled 11 percent to $16.69. The largest U.S. dairy processor was downgraded to hold from buy at Stifel Nicolaus & Co. by equity analyst Christopher Growe.
ImmunoGen Inc. sank 16 percent to $11.53 after the biotechnology company reported a royalty rate structure with partner Roche Holding AG that disappointed investors.
The S&P 500 Property & Casualty Insurance Index slipped 0.6 percent. The eight-member gauge has declined for six straight days, its longest losing streak since May. Travelers Cos., the lone insurer in the Dow, lost 0.8 percent to $71.56. Allstate Corp. fell 1.1 percent to $40.06.
Hurricane Sandy, dubbed “Frankenstorm” because it is forecast to reach the U.S. East Coast near Halloween next week, will cause insured losses of as much as $4.9 billion, Bloomberg Industries analyst Jonathan Adams estimated, citing Kenetic Analysis Corp.
Expedia Inc. surged 15 percent to $58.95. The company, which gets more than 40 percent of its business outside the U.S., expanded even as the European sovereign-debt crisis entered its third year. International revenue rose 22 percent in the period, surpassing domestic growth of 14 percent. Hotel reservations accounted for 77 percent of worldwide sales, while 7 percent came from airlines.
Amazon.com Inc. jumped 6 percent to $236.22 after posting a smaller operating loss than analysts had anticipated as the world’s largest online retailer ramped up spending on delivery services ahead of the holiday sales season.
Comcast Corp. added 3.6 percent to $37.66. The largest U.S. cable company and the majority owner of NBC said third-quarter profit more than doubled, boosted by advertising revenue, the sale of assets and a decrease in the loss of subscribers.
Eastman Chemical
Eastman Chemical Co. climbed 14 percent to $60.95. The biggest U.S. producer of chemicals from coal surpassed third- quarter profit estimates and lifted its 2012 forecast.
Arch Coal Inc. gained 10 percent to $8.06. The fourth- largest U.S. producer of the fuel reported third-quarter results that exceeded analysts’ estimates after shipments increased more than projected and costs declined.
Moody’s Corp. rose 5 percent to $48 after saying profit increased 41 percent as companies took advantage of record investor demand and low borrowing costs by issuing debt.
NetSuite Inc. gained 16 percent to $66.18, a record. The software maker majority-owned by Oracle Corp.’s Larry Ellison surged after customer gains spurred higher than expected sales growth and the company raised its full-year forecast.
Julian Robertson, founder of Tiger Management LLC, said hedge funds that have positioned themselves for a “disaster” are making a mistake.
“I think right now they are all scared,” Robertson, who once ran one of the most successful hedge funds in world, said today in a television interview on “Bloomberg Surveillance” with Tom Keene. “They are really only going to be profitable in the event of a big disaster.”
Hedge funds have trailed markets this year after cutting risk to protect themselves against losses. The Bloomberg Global Aggregate Hedge Fund Index gained 3.1 percent through September, compared with a 16 percent increase in the Standard and Poor’s 500 Index and a 4.5 percent advance in the Barclays Capital Bond Composite U.S. Index.
Hedge funds that wager on rising and falling stocks are 22 percent net long, below the average of 35 percent to 40 percent, according to an Oct. 22 report published by Bank of America Merrill Lynch. A net position is the difference between bets on rising stocks and falling stocks.
Options protecting against losses have slipped to the lowest price since March 2009 on Ford Motor Co. shares and reached a record low for General Motors Co. amid rising vehicle sales.
Skew Spread
Puts that pay should GM shares drop 10 percent cost 2.93 points more than calls betting on a 10 percent rally, according to three-month options data compiled by Bloomberg. The price relationship known as skew touched the lowest level since November 2010 last week. Ford’s skew spread fell to 0.27 points on Oct. 18, the lowest in three and a half years. GM has rallied 17 percent this year, while Ford slid 3.4 percent.
Cars and light trucks sold at the highest annual pace since March 2008 last month as consumers increased spending, according to Ward’s Automotive Group. Data this month showed confidence among American shoppers unexpectedly jumped in October to the highest level since before the recession began five years ago.
“Consumers have cleaned up their personal balance sheets and are now available to buy cars,” Brett Bartman, who manages $1.1 billion as a financial adviser at RBC Wealth Management in Beverly Hills, California, said yesterday in a phone interview. “There’s a replacement cycle going on and there’s been a refresh in the product from many of the automobile companies. Also auto loans are a little bit easier to get than they used to be. All of this is going to lead to more car sales.”
