U.S. stocks were little changed, following the biggest advance in two months in the Standard & Poor’s 500 Index, as a tumble in Hewlett-Packard Co. shares tempered data showing an unexpected increase in housing starts.
HP slumped 12 percent as it announced a charge of $8.8 billion linked to its Autonomy Corp. business, saying there were “accounting improprieties” before its 2011 acquisition of the company. Intel Corp. dropped 2.7 percent after UBS AG cut its recommendation for the largest chipmaker. Best Buy Co. sank 14 percent as the largest consumer-electronics retailer reported a $10 million loss on weaker-than-expected sales.
The S&P 500 fell less than 0.1 percent to 1,386.69 at 10:24 a.m. in New York. The Dow Jones Industrial Average dropped 22.84 points, or 0.2 percent, to 12,773.12. Trading in S&P 500 companies was almost in line with the 30-day average at this time of day.
“There are lots of things going on,” said Madelynn Matlock, who helps oversee about $14.7 billion at Huntington Asset Advisors in Cincinnati. “The housing data is great because it’s good for the overall economy looking forward. Still, companies like Best Buy and HP have had problems for a while and they are not getting any better. Everybody is on the sidelines waiting to see how Europe deals with extending more credit to Greece.”
Housing starts in October rose to a four-year high. European finance ministers will try to plug a 15 billion-euro hole in Greece’s finances and win over the International Monetary Fund in the latest installment of three years of debt- crisis brinkmanship. The meeting comes a day after France lost its top credit rating with Moody’s Investors Service.
Stocks capped a two-day rally yesterday amid better-than- forecast housing data and as President Barack Obama expressed confidence on a budget agreement with Congress. The benchmark gauge for U.S. equities gained 2.5 percent in two days, the most since July.
“One day it’s risk on, the next it’s risk off,” said Benoit de Broissia, an analyst at KBL Richelieu Gestion in Paris. “Visibility is limited and the market can over-react in one direction or another.”
HP tumbled 12 percent to $11.66. The charge from the acquisition of Autonomy was due to “accounting improprieties, disclosure failures and outright misrepresentations” that happened before Hewlett-Packard purchased the company last year for $10.3 billion. HP also forecast fiscal first-quarter profit that missed analysts’ estimates amid a continuing slump in personal computer sales.
Intel lost 2.7 percent to $19.70. The shares were downgraded to neutral from buy at UBS, which cited uncertainty around CEO transitions.
Paul Otellini will retire in May, in a surprise move three years before mandatory retirement, after failing to equip the company for a shift toward mobile devices and away from the personal computers it long dominated.
Best Buy sank 14 percent to $11.87. Chief Executive Officer Hubert Joly, who took over in September, is increasing employee training to improve customer service and plans to work with vendors on exclusive products as Best Buy customers defect to Amazon.com Inc. and Wal-Mart Stores Inc. Same-store sales fell 4.3 percent in the third quarter, more than the 3.3 percent drop estimated by analysts in a Retail Metrics survey. Sales by that measure have slid in nine of the past 10 quarters.
Chesapeake Energy Corp. rallied 1.1 percent to $17.66. Shareholder Carl Icahn increased his stake in the company to 8.98 percent from 7.54 percent, buying the additional shares between Nov. 12 and Nov. 19, according to a filing with the Securities and Exchange Commission today.
Lower earnings estimates are dragging down stocks from this year’s highs and their full effect has yet to be felt, according to Hasan S. Tevfik, a global equity strategist at Citigroup Inc. He compares the performance of an earnings-revision index, or ERI, compiled weekly by Citigroup with MSCI Inc.’s All-Country World Index since the beginning of last year.
Since the first week of May, the revision index has been less than zero, which means there were more estimate cuts than increases among analysts. The MSCI gauge of stocks in developed and emerging markets rose to its peak for the year in September and then lost as much as 6.7 percent.
“ERI remains an anchor for global equity markets,” Tevfik wrote. A similar disparity between estimate changes and share prices in 2011 was resolved when stocks declined in July and August of that year, the London-based strategist added.
Earnings projections for next year are poised to decline further, he wrote, citing the gap between analysts’ estimates for companies and strategists’ projections for stock indexes. Citigroup strategists are collectively calling for profit growth of 7 percent, trailing a 12 percent increase implied by company- specific estimates, Tevfik wrote. The lower figure may be too high, he added, as economic growth slows worldwide.