Thursday, April 17, 2008

Most U.S. Stocks Fall on Earnings Reports, Manufacturing Slump

By Elizabeth Stanton

April 17 (Bloomberg) -- Most U.S. stocks fell after Pfizer Inc.'s earnings trailed estimates and Philadelphia-area manufacturing slumped, overshadowing better-than-forecast results at International Business Machines Corp.

Pfizer, the world's largest drugmaker, tumbled to a 10-year low as competition from generic medicines reduced revenue. Motorola Inc., the biggest U.S. cell-phone maker, retreated the most in a week on profit at rival Nokia Oyj that trailed analysts' estimates. IBM climbed to the highest since 2002, leading gains in the Dow Jones Industrial Average, after the world's largest computer-services company said 2008 earnings will top its previous projection.

Seven stocks dropped for every five that rose on the New York Stock Exchange. The Standard & Poor's 500 Index added 0.85 point, or less than 0.1 percent, to 1,365.56. The Dow advanced 1.22 points to 12,620.49. The Nasdaq Composite Index decreased 8.28, or 0.4 percent, to 2,341.83.

``Analysts are expecting a pretty dour earnings season, and so are portfolio managers,'' Charles Reinhard, director of portfolio strategy at Neuberger Berman, a unit of Lehman Brothers Holdings Inc. that manages $129 billion, said in a Bloomberg Television interview. ``The market is discounting a lot.''

Profits have slumped 26 percent on average for the 61 companies in the S&P 500 that have released first-quarter results so far, according to Bloomberg data. Financial firms have fared the worst, with earnings falling an average 67 percent at the 26 companies that have reported.

Profit Concern

While the S&P 500 has rebounded 7.2 percent from a 19-month low on March 10, the benchmark for American equities is still down 7 percent in 2008. Investors are bracing for what is forecast to be the third straight quarter of declining profits, with analysts projecting a 12.3 percent decrease. Goldman Sachs Group Inc. strategists said April 14 that the earnings season got off to an ``awful'' start and Morgan Stanley said profits may fall ``a long way.''

Google Inc. jumped $53.12, or 12 percent, to $502.66 in trading after the close of U.S. exchanges. The most-popular search engine reported a 30 percent increase in first- quarter profit, topping estimates, as international expansion countered a slowdown in U.S. advertising spending.

Pfizer lost 70 cents, or 3.3 percent, to $20.40 for the biggest drop in the Dow average. Profit fell 18 percent, missing analysts' estimates, on generic competition to its cholesterol pill Lipitor and blood pressure drug Norvasc.

Motorola, EBay Slip

Motorola retreated 15 cents to $9.05. Nokia, the world's biggest maker of mobile phones, reported first-quarter profit that missed analysts' estimates and said the value of the global handset market will shrink in euro terms this year.

Nokia American depositary receipts lost $4.74 to $28.95.

EBay Inc. fell $1.11 to $31.01 after saying the slowing U.S. economy may hurt earnings, even after the world's largest Internet auctioneer posted first-quarter profit that rose more than analysts estimated on higher-selling fees and increased revenue from its PayPal payment service.

Harley-Davidson Inc. fell 70 cents to $36.09. The biggest U.S. motorcycle maker predicted 2008 earnings per share will drop as much as 20 percent as it cuts jobs and reduces shipments to dealers amid declining sales. In January, Harley had forecast per-share profit would rise as much as 7 percent for the year.

United Technologies Corp. led a decline in industrial companies, falling $1.84 to $70.79. The maker of Pratt & Whitney jet-engines and Carrier air conditioners said there were some ``early signs of moderating'' commercial-construction growth in the U.S. and some European countries.

Economy Watch

Industrial companies also retreated after the Federal Reserve Bank of Philadelphia's monthly gauge of factory activity fell to minus 24.9 for April, a seven-year low and below economists' minus-15 forecast. Separately the Labor Department said the number of people collecting unemployment insurance benefits climbed to a four-year high of 2.98 million in the week ended April 5.

IBM added $2.61, or 2.2 percent, to $123.08. The company's first-quarter profit and full-year forecast topped analysts' estimates as U.S. sales increased 6 percent in the latest period, triple the pace of the previous first quarter, while overseas sales surged 16 percent as a drop in the dollar boosted their value.

Altera Corp. climbed $1.66 to $20.86, a five-month high. The second-biggest maker of programmable semiconductors said demand for phone-equipment chips fueled a 10 percent increase in sales during the first quarter, resulting in profit that beat analyst estimates.

Hair-Care Slump

Procter & Gamble Co. dropped the most in almost three months, declining $1.71, or 2.5 percent, to $67.56. The largest U.S. consumer goods producer was downgraded to ``hold'' from ``buy'' at Deutsche Bank AG. Analyst Bill Schmitz Jr. cited the potential for slower growth in hair-care products based on results reported yesterday by L'Oreal SA of France, the world's biggest cosmetics maker. L'Oreal posted the slowest sales growth in three years.

International Game Technology fell $2.31, or 6.1 percent, to $35.70 for the biggest drop in the S&P 500. The world's largest manufacturer of slot machines reported second-quarter profit that dropped more than analysts estimated as casinos delayed purchases amid declining gambling revenue.

Danaher Corp. fell the most five months, losing $2.72, or 3.5 percent, to $74.16. The maker of measurement devices and Craftsman tools said sales to consumers slowed in the first quarter.

Financials Gain

MGIC Investment Corp. rose the most since its 1991 initial public offering, climbing $1.99, or 19 percent, to $12.49 for the biggest gain in the S&P 500. The largest U.S. mortgage insurer reported a quarterly loss narrower than the average analyst estimate.

Merrill Lynch & Co. advanced even after posting its third straight quarterly loss and writing down at least $6.5 billion of debt. Merrill, the third-biggest U.S. securities firm, climbed $1.82 to $46.71, paring its decline over the past year to 48 percent.

``We're not seeing major sell-offs on the types of companies that were expected to have lousy numbers,'' said Eric Green, director of research at Penn Capital Management in Cherry Hill, New Jersey, which oversees about $4.5 billion. ``That's a really good sign. Investors want to buy stocks.''

Citigroup Asset Sale

Citigroup Inc. rose 59 cents, or 2.5 percent, to $24.03. The biggest U.S. bank by assets sold most of a commercial lending and leasing unit to General Electric Co. Terms weren't disclosed for the sale of seven North American equipment-financing lines, Citigroup's latest move to replenish capital depleted by mortgage-related losses.

Also today, AmeriCredit Corp., a lender to car buyers with blemished credit records that's lost more than half its market value in the past year, sold $2 billion of securities backed by the loans to Deutsche Bank AG. AmeriCredit climbed $1 to $10.95

Leggett & Platt Inc. climbed $2.10, or 15 percent, to $16.45 for the second-biggest gain in the S&P 500. The maker of lumbar supports for car seats and mattress springs said first-quarter profit declined less than analysts estimated.

The Russell 2000 Index, a benchmark for companies with a median market value 95 percent smaller than the S&P 500's, dropped 0.8 percent to 708. The Dow Jones Wilshire 5000 Index, the broadest measure of U.S. shares, fell 9.8 points, or about 0.1 percent, to 13,777.04. Based on its decline, the value of stocks decreased by $12.25 billion.

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