U.S. stocks fall as internet shares tumble amid debt impasse

Masco, McKesson

Masco Corp. fell 5.3% to $19.40. The maker of home improvement and building products faces slowing growth amid a potential loss in the market share, Kenneth Zener, an analyst with Keybanc Capital Markets Inc., said in a note. He cut the stock’s rating to underweight from hold.

McKesson Corp. climbed 3.2% to a record $133.72. The largest U.S. drug distributor is in advanced talks buy German drug wholesaler Celesio AG, Dow Jones reported, citing unidentified people.

Alcoa gained 1.8% to $8.08 at 4:32 p.m. in New York. The largest U.S. aluminum producer, reported third-quarter profit that surpassed analysts’ expectations after higher earnings from one of its divisions that turns the metal into auto and aerospace parts. The stock fell 0.4% during the regular session today.

The Alcoa release marks the unofficial start of the U.S. quarterly earnings season as it is the first S&P 500 company to report results whose fiscal year follows the calendar. JPMorgan Chase & Co. and Wells Fargo & Co. will also report this week.

Data Delay

Investors will look to companies’ financial results for clues on the economy’s performance as the government shutdown, in its eighth day, delays the publication of some data. The S&P 500 has declined 1.6% since the government began on Oct. 1 its first shutdown in 17 years after lawmakers failed to reach an agreement on budgets before the start of a new fiscal year.

Profits for the S&P 500 probably increased 1.7% during the third quarter while sales rose 2.2%, according to analysts’ estimates compiled by Bloomberg. Analysts anticipate earnings growth to accelerate to 8.9% in the final three months of the year, the data show.

“A lot of the S&P earnings for the year are fourth-quarter loaded,” Bernie Williams, chief investment officer of investment solutions who oversees $16.7 billion at USAA Investments in San Antonio, said in a phone interview. “It’s more of the commentary that counts.”

Recommendation Cut

Garry Evans, global head of equity strategy at HSBC Holdings Plc, cut his recommendation on U.S. equities to neutral from overweight, saying valuations are “a little stretched.” He advised investors to increase holdings in emerging markets because growth in China is stabilizing and stocks are cheap.

The S&P 500 has climbed 16% this year as earnings beat estimates and data from manufacturing to housing and the labor market improved. The benchmark gauge is trading at 15.9 times reported earnings, up 12% from the beginning of the year and compared with a multiple of 11.9 for the MSCI Emerging Markets index, data compiled by Bloomberg show.

The International Monetary Fund reduced its global outlook for this year and next as capital outflows further weaken emerging markets and warned that a U.S. government default “could seriously damage the global economy.”

Growth worldwide will be 2.9% this year and 3.6% next year, the IMF said in a report released today in Washington, compared with July predictions of 3.1% for 2013 and 3.8% for 2014. The IMF’s forecasts factor in a short U.S. government shutdown and an agreement on the nation’s debt-limit before the Oct. 17 deadline.

www.bloomberg.com

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