Dow falls 43 on Caterpillar's miss

Caterpillar shares get hit when earnings miss Street estimates. McDonald's and Schlumberger results impress. Tech shares rise on AMD and SanDisk. The debt-ceiling crisis gets worse.

By Charley Blaine Jul 22, 2011 1:03PM
Charley BlaineUpdated: 7 p.m. ET

If it weren't for Caterpillar (CAT), one could say this was not a bad day for stocks.

Tech stocks jumped on the strength of big earnings late Thursday from chip makers Advanced Micro Devices (AMD) and SanDisk (SNDK) and decent earnings from Microsoft (MSFT). Oil services giant Schlumberger (SLB) helped energy stocks move higher. Financial stocks weren't a bust.

But this was one of those weird days when one stock -- Caterpillar -- was responsible for the entire loss for the Dow Jones Industrial Average's ($INDU). The blue chips ended down 43 points to 12,681.

Caterpillar, down 5.8% to $105.15, contributed nearly 49 points to the Dow's decline. Had Caterpillar simply closed at Thursday's finish of $111.60, the Dow would have finished with a small gain.

But, while the Dow was off a little -- only a third of a percentage point -- the Standard & Poor's Index ($INX) was up 1 point to 1,345. The Nasdaq Composite Index ($COMPX) jumped 24 points to 2,859, and the Nasdaq-100 Index ($NDX.X) added 25 points. Monday could be a difficult day because of the growing political crisis in Washington over the debt ceiling limit.

Article continues below.
The Dow ended the week up 1.6%, with the SP 500 up 2.2% and the Nasdaq up 2.5%. For the year, the Dow is up 9.5%. The S&P 500 has risen 7%, with the Nasdaq up 7.8%.

So, what was Caterpillar's sin?
The construction equipment giant earned $1.72 a share in the second quarter. But it missed the Street estimate of $1.79.

Mind you, Caterpillar actually had a good quarter, although its outlook suggested worries about softening in the United States and China. Earnings per share might have missed estimates, but they were up 58% from a year ago. Revenue was up 37% to $14.23 billion.

And these results came despite giving up $200 million in revenue and $60 million in operating profit from the March 11 earthquake and tsunami in Japan.

A mixed day for stocks
Caterpillar's effect on the Dow points up a major difference between how the Dow and other indexes are calculated. The Dow is price-weighted. So, the bigger the stock price, the more the effect on the index.

The S&P 500 is market-cap-weighted. So, the bigger the market capitalization of a stock, the larger the effect on the index. So, Exxon Mobil (XOM) and Chevron (CVX), two of the biggest stocks by market cap, represent about 5% of the value of the S&P 500.

Granted, the Dow didn't have a great day. Only 13 stocks in the index were higher, led by McDonald’s (MCD), up 2.3% to $88.56, and Microsoft, up 1.6% to $27.53. (Microsoft publishes MSN Money.)

Meanwhile, 76 Nasdaq-100 stocks were higher, with SanDisk the leader, up 9.6% to $45.57. AMD, up 19.2% to $7.75, and SanDisk were the top S&P 500 performers.

Apple (AAPL) was up 1.6% to $393.30 and contributed more than 5 points to the Nasdaq-100. The push was due in part to reports it was in talks to buy Hulu, the online video streaming company.

Markets for the week



7/22/2011

7/15/2011

% chg.

YTD chg.
Dow Industrials

12,681.16

12,479.73

1.61%

9.53%
S&P 500

1,345.02

1,316.14

2.19%

6.95%
Nasdaq 

2,858.83

2,789.80

2.47%

7.76%
Russell 2000

841.82

828.78

1.57%

7.42%
Crude oil 

$99.87

$97.24

2.70%

9.29%
(per barrel)











U.S. Dollar Index 

74.41

75.52

-1.47%

-$0.06
10-yr. Treasury

1/0/1900

1/0/1900

1.93%

-$0.10
Gold

$1,601.50

1,590.10

0.72%

$0.13


Debt-ceiling debate remains a worry
Hanging over the entire market was the continuing debate over raising the nation's debt limit. Negotiations continued to go nowhere. A plan floated by the White House to agree to spending cuts now and tax reform later was basically nixed by Senate Democrats. The Senate also killed the House balanced-budget bill.


Late today, House Speaker John Boehner broke off talks with the White House. Instead, he would try to work with the Senate. President Barack Obama said the talks broke desite "an extraordinarily fair deal" to raise the debt limit. A major obstacle, he said, was that Boehner can get Republicans "to say yes to anything."

Futures trading suggested stocks could fall sharply on Monday.


The uncertainty is a big problem, Caterpillar CEO Doug Oberhelman said everywhere he could, including to CNBC this afternoon. The lack of a deficit reduction plan, improvements in trade policy and tax reform are sapping business confidence and keeping companies from adding jobs. Plus, the company is worried that the nation's deteriorating infrastructure -- roads, bridges, airports and the like -- aren't providing customers with a reason to invest.

At the same time, the company is worried that governments may tighten too much and will guarantee a weak recovery at best and risk another recession. "That would likely result in excessive unemployment, the potential of lower construction spending and a further diminishing of the role of developed countries in the world economy," the company said.

Gold ends week above $1,600
Gold (-GC) jumped to as high as $1,607 an ounce before settling in New York at 1,601.50. It's the first week gold finished above $1,600. Silver (-SI) settled up $1.18 to $40.122 an ounce.

Crude oil (-CL) settled up 74 cents to $99.87 a barrel. Oil's gain and decent earnings from Schlumberger (SLB) helped energy shares overall move higher.

Gold was up 0.7% for the week. Silver rose 2.7%. Oil was up 2.7%.

Interest rates were lower, with the 10-year Treasury yield falling to 2.964% from 3.01% on Thursday. The dollar was higher against the euro as some of Thursday's euphoria over the latest Greek bailout waned.

Still, stocks in Europe and Asia moved higher after European leaders agreed to a 109-billion-euro ($157 billion) rescue plan for Greece on Thursday. The program puts the country in default for a short period but is expected to limit the risk of debt problems spreading to other economies in the eurozone.

Energy prices -- New York close



Fri.

Thur.

Month chg.

YTD chg.
Crude oil (-CL)

$99.87

$99.13

4.66%

9.29%
(per barrel)











Heating oil (-HO)

$3.1280

$3.0992

6.17%

22.97%
(per gallon)











Natural gas (-NG)

$4.3990

$4.3950

0.57%

-0.14%
(per mil. BTU)











Unleaded gasoline (-RB)

$3.1301

$3.0995

5.42%

27.59%
(per gallon)











Brent crude 

$118.67

$117.51

5.50%

25.25%
(per barrel)











Retail gasoline

$3.6950

$3.6890

4.35%

20.28%
(per gallon; AAA)












McDonald's says more consumer traffic; Verizon slips
McDonald's restaurant chain earned $1.35 a share in the second quarter. Analysts had expected $1.28. Fueling the growth: More consumers dined out, and the McCafe line of beverages boosted sales.

Second-quarter revenue climbed 16% to $6.91 billion, ahead of the Street estimate of $6.6 billion. Same-store sales grew 7.7% worldwide in June and 6.6% in the United States, the biggest gain since June 2008.

Verizon Communications  (VZ) dropped 2.2% to $36.74. While the company swung to a bigger-than-expected second-quarter profit, it had fewer new Apple iPhone subscribers than rival AT&T (T). The company formally named Lowell McAdam as chief executive, starting Aug. 1.

GE beats estimates; shares slip
General Electric's (GE) second-quarter earnings beat analysts’ estimates, buoyed by its finance unit, as the industrial order backlog rose to a record. Shares were off 0.6% to $19.04 after hitting $19.53 soon after the open.

Profit from continuing operations climbed 18% to $3.73 billion, or 34 cents a share, from $3.15 billion, or 29 cents, excluding pension costs, GE said. That  beat the Street estimate of 32 cents.

CEO Jeffrey Immelt has said losses have peaked at GE Capital, and the unit is writing more profitable loans. The unit’s gains helped offset narrower operating margins at GE Energy, where the company said profitability will improve in the second half. GE’s total backlog, a measure of future industrial growth, rose 6.8% to a record $189 billion.

Schlumberger shares rise on strong earnings
Schlumberger, the world’s largest oilfield-services provider, said second-quarter profit rose 64% as increasing crude oil prices drove more U.S. onshore drilling. Net income rose to $1.34 billion, or 98 cents a share, from $818 million, or 68 cents, a year earlier, Schlumberger said.

Excluding a gain from selling a business unit and merger costs, the company earned 87 cents a share, 2 cents a share better than the Street estimate. Revenue jumped 62% to $9.62 billion.

The average number of active oil and gas rigs around the world rose to 3,163 in the second quarter, up 15% from 2,762 a year earlier, according to Baker Hughes. Schlumberger finished up 3.1% to $93.81.

Short hits from the markets -- New York close



Fri.

Thur.

Month chg.

YTD chg.
Treasury yields











13-week Treasury bill

0.030%

0.030%

50.00%

-75.00%
5-year Treasury note 

1.508%

1.541%

-14.03%

-25.20%
10-year Treasury note

2.964%

3.010%

-6.14%

-10.32%
30-year Treasury bond

4.260%

4.315%

-2.78%

-2.34%
Currencies











U.S. Dollar Index

74.412

74.231

-0.30%

-6.15%
British pound

1.6279

1.6324

1.58%

4.31%
(in U.S. $)











U.S. $ in pounds

£0.614

£0.613

-1.55%

-4.14%
Euro in dollars

$1.43

$1.44

-1.02%

7.14%
(in U.S. $)











U.S. $ in euros

€ 0.698

€ 0.693

1.03%

-6.66%
U.S. $ in yen 

78.55

78.51

-2.91%

-3.46%
U.S. $ in Chinese

6.44

6.45

-0.26%

-2.58%
yuan











Canada dollar

$1.051

$1.060

1.29%

4.74%
(in U.S. $)











U.S. dollar 

$0.952

$0.943

-1.28%

-4.52%
(in Canadian $)











Commodities

 

 

 

 
Gold (-GC)

$1,601.50

$1,587.00

6.57%

12.67%
(per troy ounce)











Copper (-HG)

$4.410

$4.384

2.98%

-0.83%
(per pound)











Silver (-SI)

$40.1220

$38.9470

15.19%

29.69%
(per troy ounce)











Wheat (-ZW)

$6.9225

6.7725

18.38%

-12.84%
(per bushel)











Corn (-ZC)

$6.9000

6.7925

9.70%

10.84%
(per bushel)











Cotton 

$0.9914

0.9933

-37.96%

-31.54%
(per pound)











Coffee

$2.4150

2.408

-8.99%

0.42%
(per pound)











Crude oil (-CL)

$99.87

$99.13

4.66%

9.29%
(per barrel)










 

53Comments
Jul 22, 2011 2:02PM
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 the world’s largest oilfield-services provider, said second-quarter profit rose 64% as increasing crude oil prices drove more U.S. onshore drilling. Net income rose to $1.34 billion, or 98 cents a share, from $818 million, or 68 cents, a year earlier, Schlumberger said. 

but yet they want us to believe they ill go out of business if gov't subsides are eliminated....WHAT?!?!?!
Jul 22, 2011 2:31PM
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We need to get rid of the lawyers, special interest groups and ex-public servants from the ranks of the politicians and get some people who have common sense and elect people who can think outside of the box.  When the people continue to elect the current make up of politician you are going to continue to get what we have now.  Throw in the economist who still rely on past theory and models to correct what I believe be a fundamental change that no longer makes the past a valid predictor of the future and markets that are more computer and press driven it is no wonder the average american has no faith.
Jul 22, 2011 3:07PM
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Ok. If you read my comment yesterday I was 100% CORRECT when I said the Wall Street focus group would meet last night and choose to make today an "off" day, and then start hyping a big monday. This is what REALLY stands out to me on these people "phoniness"...They claimed the HUGE 200 plus day this week was because of an "imminent" debt deal, now fast forward to today, and as of this morning Obama came out and publically said that the "deal" was voted down. Now with this in mind, the markets should have said that the deal fell through and there should have been a HUGE CRASH. That was NOT the case...this entire organization is manufactured, staged and controlled to the "point" by these lying criminals.!!!
Jul 22, 2011 3:24PM
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Charley, I gotta ask: how can you write this stuff with a straight face?  I wonder what's gonna make the market shoot up 200 points next Monday, then come down 200 on Tuesday?..... Greece, Caterpillar, jobs reports,...... come on.  The headline should read, "BIG BANKS manipulates the markets (again) to cause a downward swing so they can take your money Mr. Average Joe American"; and the media is doing its job to make sure that the truth stays hidden - gotta ask, why?  You know there are no good reasons for such swings besides the obvious.
Jul 22, 2011 4:31PM
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Good job oil traders and speculators. $100 a barrel oil should really help to jump start the economy. You people are nothing more then a bunch of Greedy Morons who could care less whether this country ot its people survive. I hope that someday you get knocked off your perch and fall flat on your face. If this Government cared anything about its people, they would pass laws to regulate oil speculation on Wall Street. This country is being held hostage by these people and the way it looks, it will never change. What a darn shame to do this to poor people in our country.
Jul 22, 2011 4:56PM
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Thank you very much Schlumberger and all you morons associated with driving oil up to $100/barrel and further reducing my purchasing power as a consumer.  This is direct cause of a stagnant economy.  When will you zipperheads see the light and stop this unwarranted run up other than fueling your own opulent lifestyles.  May the crash be with you!
Jul 22, 2011 3:27PM
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Catepillar results?  Like the fact that there's this spat going through government, the President said that Americans voted for a divided government in 2010, that doesn't mena they voted for a dysfunctional government, and now with the Senate rejecting the houses deal which didn't address the revenue side of things....

 

Umm yeah, like Catepillar results are going to be weighing on all American's thinking more then our government's ability to work together accross party lines rather then squable like 2 year olds, and 2 year olds where both political parties seem to be going through the terrible 2s.....

Jul 22, 2011 2:50PM
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Had Caterpillar never existed, who would be driving this market down? 
Jul 22, 2011 2:56PM
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Angry, if every time a bunch of newly elected officials hold their position on a principle, the press lambastes them, attacks their integrity and trashes their view, we end up with conformist politicians. Don't buy papers, tell surveyors you never listen to the radio stations or watch the TV stations they are reviewing because they are unfair in their news coverage. Support the attacked, starve the attacker. It's the American Way.
Jul 22, 2011 3:53PM
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jimpopper - my vote is with your thinking; probably should have included the press in my original post but kind of feel the press has become a separate political agenda of their own.   But then if we had people who were willing to stand up to the press they truly would be outside the box.  Politicians depend a lot on the press for re-election so if we have politicians whose primary goal is not to make politics a career then the press would not have near the hold on them.
Jul 22, 2011 3:40PM
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well...so much for a relief rally...just another PUMP from the manipulators and DUMP from the gambling addicts...should be another sell off monday with unemployment rising again...how many losses are investors going to take before they lose everything again...
Jul 22, 2011 4:07PM
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Until the large deposits of minerals in Afghanistan and the two (2) large unfunded wars we have involved our selves, Only since CAT started construction  manufacturing which hired 19,000 in Asian countries to build road, bridges, schools, hospitals and mining equipment is why CAT is now valued at $111/share. Think that nearly 15 years ago CAT was @$7/share

 

On the other hand Cat only hired 7,600 worker for three plants here in the good ole USA.  You mean to tell me that the construction equipment is not to essential here in AMERICA.  We need roads, schools, bridges, hospitals but, we have a shortage of workers to build these very essential here in AMERICA 

Jul 22, 2011 6:04PM
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The pour man's definition of a capitalist is. A person with more money than they will ever need and still want more.
Jul 22, 2011 7:01PM
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Obama is like any other powerful politician catering to the electorate. He says what we want to hear, but he'll always be constrained by practical concerns, international considerations, and the reality of our republican government--all of which complicate decisionmaking and annoy many, many Americans (who prefer black & white, fastfood answers). 

 

Thus he talks out both sides of his mouth. And frankly, Americans love it. Makes it simple! So we keep electing handsome Presidents who sweet-talk and seduce us while failing to deliver on substantive promises and substantive change. Maybe it's time to look into a mirror and stop blaming the higher-ups. Maybe it's time to look at the roots that feed our poisoned political tree.

Jul 22, 2011 6:49PM
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   Creation 76   Interesting thoughts the wealthy first and foremost or government jeopardize  its own stability. Our current political administration is a perfect is example of the old greek term demagoguery the power of the One Leader !
Jul 22, 2011 9:37PM
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Wealthcreation: It's disturbing how many people here are anti-capitalist. The current global market does have some serious problems--a great deal of it caused by meddling governmental regulation.

Wow! You are so lost in your own ideology I doubt you know where your behind is anymore.

It was the lax government regulations that produced this mess in the first place.  So for the love of anything with common sense, don't try to rewrite the last 30 years. 

  • De-regulation resulting in globalization or as I like to call it stupid trade such as NAFTA
  • Bush jr. taking away all of the textile and all other industries quotas and tariffs
  • The repeal of Glass-Steagall act, the act that had separated risky investment banking with deposit banking.  One of the regulations that assisted in ensuring another 1929 wouldn't happen... no more than a few years later BANG!
  • The inability for the SEC to regulate derivatives
  • Not appropriately sunset the tax cuts when we were in a financial boom after the tech recession.
  • Right to Work states which really should be Right to F' the Worker states which essentially destroys the ability of any union especially the good grass root local unions.

If business had its way, you'd have one class.  The haves and the have nots.  And unfortunately that's what we're going back to. 

If government is so bad, than you unfortunately made an even worse case of evil for the corporation and capitalist system.   Especially since you even said, its the rich that have to control the government anyways for the stability of a nation.  LOL! 

 

Capitalism is not inherently evil or good.  It is just a system.  And like all systems it must be balanced with the good of the people.  And since we are not an egalitarian society, and will never be unless 100's of millions just suddenly die, we need social policy protecting those who are disabled due to age, injury, or other medical conditions.  And we also need to ensure standards are maintained, because a business generally only cares about one thing-- ensuring it profits. 

 

 

Jul 22, 2011 9:03PM
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The Original Looneytarian:  You are so far off the truth it hurts.  I know lots of people who have several part time jobs (because they can't find one full time job) and usually work in excess of 60 hours. 

It's sad, as a trainer for a company then going into the Air Force (you know a totalitarian military environment expecting nothing but perfection the first time) I actually enjoyed myself more in the Air Force then the 5 years with the company I worked for.  Maybe because the military was honest and very transparent.  You knew where you stood, and had a pay chart to show where you'd be.  Not some dick CEO saying, "Well we're all going to tighten our belts as you can see the economy isn't doing so well so no raises what so ever this year." And oh yeah they made a huge profit those years they were doing this too. 

 

Work ethic is certainly the problem here.  But it is work ethic from the top that has F'd people over.  The pay stinks, hours lousy, and now they are cutting even more people expecting even more to be done.  And when they realize they do need people, they hire overseas.  Not because workers here are lazy.  Its because they only have to pay them an incredibly small fraction of the cost. 

And man, can I tell you some goofy stories of these foreigners/outsourced people coming in on some weird drug or trashed from a party drinking or just simply not showing up for half the day.  And did the outsourcer fire them, no.  They acted like nothing happened, even though I complained to their HR about the guy who was coming in trashed everyday, even lit a cig in the training room, I finally got my way and the outsourcer had him escorted out of the building.  Only to return to someone else's class a few weeks later.  And sometimes I had to let them go for the rest of the work day if the we experienced frequent brown outs and the back up generator was out of fuel.  

 

So work ethics yep.  The ethics from the pigs at the top.  Not the bottom.

Jul 23, 2011 1:13PM
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Surprised debt, to see someone opine on something without knowledge is a bit disturbing.  you have only a basic grasp of the subject matter and obviously no in depth understanding of this issue - why spread half-truths and spin?  go do some basic reading and research first.

 

the trade agreements were developed by the bush administration and have wide bi-partisan support as net 250,000 job creators over the short term and far more over the long term.  the current sticking point is to further prevent sector (NOT overall) job loss by attaching legislation to ensure and pay for re-training in the job sectors that are impacted.  again, overall net domestic job creation is a certainty.

 

think first ..... post second please .... 

Jul 22, 2011 10:27PM
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Thumbs down rupert murdoch doesn't like you jeremy ......
Jul 22, 2011 10:06PM
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Jeremy12341 for president!!!  I will start the write in here and now.
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