Stocks turn lower as dollar strengthens

The Dow hits a 2010 high, then pulls back. The number of first-time unemployment claims drops more than expected. Quarterly earnings from McDonald's, Caterpillar and UPS beat estimates.

By TheStreet Staff Oct 21, 2010 8:06AM

TheStreetBy Melinda Peer, TheStreet

 

Updated at 2:18 p.m. ET

 

Stocks were falling Thursday afternoon, reversing course after a surge of better-than-expected earnings, a decline in initial jobless claims and a modest increase in September leading indicators fueled a morning rally. By this afternoon, a stronger U.S. dollar and weaker-than-expected growth in Philadelphia area manufacturing activity in October ahd soured investors' moods. 

 

At 2:18 p.m. ET, the Dow Jones Industrial Average ($INDU) was down 26 points, or 0.2%, to 11,082. Earlier, the blue-chip index touched 11,206, the highest level since April 26.

 

The S&P 500 ($INX) was down by 5 points, or 0.4%, to 1,174. The Nasdaq ($COMPX) was falling 15 points, or 0.6%, at 2,443.

 

A new report from the Labor Department offered an encouraging sign that the economy is recovering. Initial jobless claims fell by 23,000 to 452,000 during the week ended Oct. 16. Economists had expected the number to decline by 7,000.

"Today, in particular, we have lots of earnings reports that are in excess of expectations and that are also good with respect to the forward-looking picture," said Lawrence Creatura, portfolio manager at Federated Investors.

 

"It's kind of interesting because the company-specific news is in conflict with some of the dollar/macro news that we've been seeing recently, but that's because companies are adaptive, responsive organisms. They can adjust to a variety of different environments and we've been in a difficult environment for a while. That's allowed management teams to adjust in order to confront headwinds," he said, pointing to headcount reductions, spending on productivity improvements, M&A activity and investments in foreign markets. 

 

McDonald's (MCD) topped third-quarter profit expectations by 4 cents with earnings of $1.29 a share. Sales of $6.3 billion also beat estimates slightly. The stock was climbing 1.9% to $78.85.

 

Travelers' (TRV) third-quarter earnings climbed 7% to $1 billion, or $2.11 per share. Excluding certain items, the company earned $1.81 a share, beating the $1.51 average estimate of analysts. The shares were adding 0.6% at $54.98.

 

Shares of Caterpillar (CAT) were down 2.2% to $78.09 in midday trading after the construction and mining equipment maker reported better-than-expected third-quarter earnings of $1.22 a share.

 

AT&T's (T) third-quarter net income more than tripled to $12.3 billion, or $2.08 a share, as revenue jumped 2.8% to $31.6 billion. Excluding certain items, the company earned 55 cents, matching the average estimate of analysts surveyed by Bloomberg. AT&T shares were slumping 0.8% to $28.40.

 

United Parcel Service (UPS) shares were losing 0.8% at $69.08. The package delivery company said net income rose 81% to an adjusted profit of 93 cents a share, outpacing estimates for 88 cents a share.

 

Xerox (XRX) reported third-quarter adjusted earnings that were 1 cent more than the average estimate at 22 cents a share. The company also raised its year-end forecast to an adjusted earnings range of 92 to 93 cents a share from 88 to 92 cents a share. The shares were up 1.4% at $11.24.

 

Eli Lilly (LLY) topped expectations with an adjusted profit of $1.21 a share and raised its year-end earnings forecast to a range of $4.65 to $4.75 a share, excluding certain items, from its previous range of $4.50 to $4.65. Eli Lilly shares were falling 1.8% to $35.35.

 

PNC Financial's (PNC) third-quarter earnings doubled to $1.1 billion, or $2.07 a share, as the company benefited from proceeds from a divestiture. Adjusted earnings of $1.56 a share surpassed the $1.36 estimates. The stock was rising 2.4% to $53.99.

 

Nokia (NOK) posted a third-quarter operating profit of 403 million euros ($564.6 million) as sales rose 5% to 10.3 billion euros. Nokia's American depositary receipts were gaining 3.6% to $11.22.

 

Amazon.com (AMZN) will report earnings after the closing bell. According to Briefing.com, analysts expect a profit of 44 cents a share. Amazon shares were up 4.4% at $165.53.

 

In other economic news, manufacturing activity in the mid-Atlantic region wasn’t as robust as economists anticipated. The Federal Reserve Bank of Philadelphia's manufacturing index came in at 1 for October, missing the 1.4 that Wall Street projected, according to Briefing.com.

 

Leading indicators rose 0.3%, as expected, in September, compared with growth of 0.1% in August, the Conference Board said.

 

Crude oil for December delivery was losing $1.53 cents at $81.01 a barrel. The December gold contract fell $12.70 to $1,331.50 an ounce.

 

The dollar was trading higher against a basket of currencies, with the dollar index up by 0.34%, and the benchmark 10-year Treasure note fell 10/32, strengthening the yield to 2.518%.

 

Economic growth in China slowed to 9.6% in the third quarter from 10.3% in the previous quarter.

  

Hong Kong's Hang Seng rose 0.4%, and Japan's Nikkei shed 0.05%. The FTSE in London gained 0.5%, and the DAX in Frankfurt was ahead by 1.3%.

 

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87Comments
Oct 21, 2010 8:59AM
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Wall Street is cheering because the weekly unemployment is 452,000?  They fell by 23,000 versus economists expectations of falling only 7,000 .  Are we on another planet or in another dimension?  Economists were invented to make weatherman look good.  How about cheering when the weekly unemployment drops below 300,000.  These week to week fluctuations between 420000 to 480,000 are totally meaningless
Oct 21, 2010 8:43AM
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Right now, based on interviews I have seen, the US Treasury accepts no responsibility for the devaluation of the dollar.  They lay the blame of weakness in the dollar at the feet of the Fed.  The Fed says just the opposite, that the Treasury is responsible for the weak dollar, and that the Fed isn't engaging in policies that would devalue the dollar.

"Mom, Timmy hit me on the head."
"Yeah, but Ben hit me first"
"No I didn't"
"Yes you did"
blah, blah, blah, blah

Just don't pay attention to the fact that the Fed is buying treasuries from, well, the US Treasury.  And the US Treasury isn't being robbed, they are willingly selling to the Fed.

Meanwhile, all this blame and a can of Coke now costs a dollar.  And a half-gallon of ice cream is $5 and you don't even get the full half-gallon anymore, it's 1.75 quarts.

Oct 21, 2010 11:40AM
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The Liberal Democrats are running scared.  They should be. 
Oct 21, 2010 11:04AM
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Dow up 93 points, and reaching new yearly highs. which will be great for more wall street paychecks and bonuses

 

Does this mean that the stimulus worked......and that Helicopter Ben does not need to keep rates at insamely low levels which help banks but hurt savers?

If the Dow is reaching new yearly highs....then why the doom in gloom by the federal reserve? 

Not sure what else our government do to increase the spread between the wealthy and the poor, they seem to be hitting on all 8 cylinders. 

Oct 21, 2010 11:24AM
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I say we should all party like it's 1776!

Oct 21, 2010 10:31AM
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  Where are these jobs????  This is playing the numbers game like many corporations do at the end of the month to make things look better than they really are.

  I know several unemployed persons that are actively looking for work. There are way more people looking than there are jobs. And when their benefits run out?? Oh they are no longer counted. Is this the drop in unemployment claims we are talking about.

  My job has cut benefits and reduced wages. All while prices continue to rise. I now do twice as much work for less pay. My employer posted a temporary skilled job and received 600 applications. And I don't believe any of these people were on unemployment. And I doubt anyone was giving up a permanent job for a temporary job in the middle of the day. 

  Where is all the changes promised by the Obama Administration. I know no one who has benefited from all the economic stimulus plans.

Yep, it's election time !!!! And you can bet I'm going to vote for change. That word can be a two edged sword. Change for 2010 and 2012.Smile

Oct 21, 2010 9:51AM
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600,000 people will be hired for the Xmas season and black friday is only a month away. I wouldn't put a whole lot of weight into any jobs numbers until after the holidays.
Oct 21, 2010 8:26AM
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A couple of things this morning -

An interesting discussion by the shills on CNBC this morning.  One of the bobble heads posed the question of why would anyone invest in US Treasuries paying 2.5% for 10 years when they could buy stock in AT&T and earn a dividend equal to 6%?  Even though I don't usually glean much from the bobble heads, this is still an interesting question.  I'm sure there are pension funds, bond funds, etc.. that are forced by their respective charters to purchase a certain amount of treasuries.  And we all know the Fed is buying treasuries, too.  But why would anyone else be buying treasuries?  Are lots of people/institutions still that scared of stocks? - even huge blue chips like AT&T?  If the big guys are still buying bonds by choice, what do they know that the rest of us don't?  There has to be a reason why intelligent people are forgoing much higher (and seemingly safe) returns from dividends and instead buying much less attractive, but safer bonds. 

This would also be a backdoor way for the Fed to drive up the stock market - force treasury yields so low that the dividends look more attractive and people buy more stock.

This should be enough to make any investor nervous about what's coming down road.

And second, AT&T came in with some good numbers.  But the analysts estimates seemed really odd - they predicted 31.247 billion in earnings and AT&T reported 31.6 billion.  Why in the world did the analysts stretch out their guesstimate to the nearest million?  When we're talking about tens of billions of dollars, trying to estimate to the nearest million seems pointless.  Why not estimate to the nearest ten million or hundred million, which would be much more practical.  I know that the consensus estimate is an average, but still, why not do a little rounding and save the headache?
Oct 21, 2010 11:24AM
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Caterpillar reporting better than expected numbers, stock is down.

AT&T reporting better than expected numbers, net income tripled, stock is down.

UPS reporting better than expected numbers, net income rose 81%, stock is down.

Eli Lilly reporting better than expected numbers, stock is down.

What kind of sick, twisted logic puzzle is this?

Oct 21, 2010 10:22AM
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Good point made about filings of intital claims....but the point is that our GOV has continually thru POMO put billions in the market to keep it up, destoryed the dollar and continually lies and manipulates instead of promoting the principals this country was based on.
Oct 21, 2010 3:14PM
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Deklen, kind of like this year? And most likely 2012.
Oct 21, 2010 3:11PM
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Deklen kinda represents the Democrat party of today, brainless moonbats.  There is no reasoning with them, good news is I can see Nov 2 from my front porch and it's gonna be fun watching the MSNBC crew announcing all "their" losses
Oct 21, 2010 2:59PM
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Deklen, please ask moveon for some new talking points and perhaps some real information. I think even the libs are tiring of your nonsense.
Oct 21, 2010 2:54PM
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Deklen, the last 4 years were controlled by a dem congress. 4 years.... 4 of the worst years since Jimmy Carter. So we are not voting quite a few of them back in. Were sending many to the unemployment line in 2 weeks. Christmas in NovemberParty
Oct 21, 2010 2:49PM
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A good addition to the website upgrade would have been an "unintelligible verbal diarrhea" button in addition to the thumbs up or down. After a certain number of hits the moron would have posting privileges revoked for at least the remainder of the day - or "deklened", as it would come to be called.
Oct 21, 2010 2:40PM
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Deklen, when a CEO hits on a female for a BJ you and NOW become unglued, but no big deal if your beloved Bubba does it in the whitehouse. You are the dumbest hate filled moron on here. Hypocrite is just too mild an adjective to describe you.
Oct 21, 2010 2:35PM
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Iggy, so far I only know of one big time politician that  killed a women and got off without much of an inquiry. We can go back and forth all day. Kennedy, Edwards, Nixon, Newt, Clinton......

 

The biggest difference is that it matters a lot more on the right. As long as the handouts keep coming, the left will shrug it off without batting an eye.

Oct 21, 2010 2:08PM
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Deklen, you are so stuck on your stupid talking points and hatred you can't even figure out when someone is agreeing with you. 

 

 The difference between Bubba and the rest is that only Bubba so far has lied under oath. If he didn't he would still be able to practice law.

 

Refresh my memory, who again signed NAFTA?

Oct 21, 2010 11:40AM
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My niece just went on unemployment.  She has no interest in looking for work, or improving herself in the mean time.  She is a single mom, 26, overweight and has no aspirations, except to go geocaching.  I find it completely irritating.  Nice run on HUN today.  Took profit.  Yeah baby.
Oct 21, 2010 9:54AM
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Obama is going to get the credit when the economy begins to boom again (Don't like the guys Politics-but facts are facts). The worse of the bad news to the economy is over, the recovery has begun. Dow will hit 12K by X-mas, 14k by Summer's end. The one's without jobs will find jobs, maybe what they don't want right away, but in time. All economy's return, it's a cycle. Timing the cycle for an election can be rough, ask George Bush Sr., yikes he ran for second term right as it was bottoming. Even I'm thinking of expanding my business, and 6 months ago we had layoffs.  As for Real estate, having low prices isn't so bad for the young ones starting out, in fact, it helps make the economy stronger (they'll buy things for their homes washers, dryers, etc). The pricing in the early 2000's was out of control, and actually hurt certain job markets, with such high home prices, employers in Boston couldn't entice new recruits, so the NC and NV market boomed. No more gloom and doom, get on with your life. It's way to short!
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