Stocks slump on earnings, U.K. economy reading

Verizon and Johnson & Johnson post lower-than-expected revenue. The United Kingdom's economy contracted during the last three months of 2010. Consumer confidence rose significantly in January. Home prices fell 1.6% in November.

By TheStreet Staff Jan 25, 2011 8:42AM

TheStreetStock market © Comstock Images/JupiterimagesBy Melinda Peer, TheStreet

 

Updated at 11:51 a.m. ET

 

Stocks retreated Tuesday as the market weighed mixed earnings and an unexpected economic contraction in the U.K. against a jump in consumer confidence in January. 

 

At 11:51 a.m., the Dow Jones Industrial Average ($INDU) was down 65.2 points, or 0.5%, at 11,915. The S&P 500 ($INX) was down 8.2 points, or 0.6%, at 1,282 and the Nasdaq ($COMPX) was falling 16.2 points, or 0.6%, to 2,701. 

 

The Conference Board said consumer confidence jumped to an eight-month high of 60.6 in January from 53.3 in December. The level far exceeded economists’ expectations for a January reading of 53.5, according to Briefing.com. 

"Consumers have begun the year in better spirits," said Lynn Franco, director of the Conference Board consumer research center. "As a result, the index is now near levels not seen since last spring."

 

Home price data, however, showed continued sluggishness. The S&P's Case-Shiller 20-city home price index declined 1.6% in November, after dipping by 0.84% in October. The level just missed the drop of 1.5% that economists expected, according to Briefing.com.

 

The Federal Housing Finance Agency's home price index was unchanged in November, after rising 0.7% in October.

 

European shares slipped after the U.K.’s Office of National Statistics said the economy contracted 0.5% in the three months through December, compared with growth of 0.7% in the previous three-month period.

 

London's FTSE was losing 0.3% and the DAX in Frankfurt was down by 0.05%. Earlier, Hong Kong's Hang Seng slipped 0.05% while Japan's Nikkei rose 1.2%.

 

Tuesday’s session saw a handful of Dow components release earnings. Verizon (VZ) missed expectations and Johnson & Johnson (JNJ) met profit forecasts but fell short of revenue estimates. 3M (MMM) topped expectations despite a slight dip in quarterly profits while DuPont DD and Travelers (TRV) beat profit expectations.

 

Travelers and Verizon were among the Dow’s top performers along with Wal-Mart (WMT),  while 3M and American Express (AXP), which missed earnings estimates by 3 cents late Monday, were its biggest laggards.

 

In other earnings news, U.S. Steel (X) reported a wider-than-expected loss of $1.74 a share, compared with the loss of $1.11 that Wall Street forecast but managed to beat sales expectations with revenue that rose 28% to $4.3 billion. Analysts had projected sales of $4.2 billion. The stock was off by 1.1% at $53.81.

 

Harley-Davidson (HOG) loss of 18 cents a share and said sales rose 20% to $917.1 million. Analysts had projected a larger loss of 30 cents a share on lower sales of $863 million. The stock was up 7.4% at $39.19.

 

Shares of Baker Hughes (BHI) were trading 4.1% higher at $60.92 after the oilfield servicer posted adjusted earnings of 84 cents a share, topping Wall Street's estimates by 19 cents.

 

Coach (COH) saw its stock slump 1.4% to $52.62 despite reporting better-than-expected earnings of $1 a share on sales of $1.26 billion. Analysts had projected earnings of 97 cents a share on sales of $1.21 billion.

 

Members of the Federal Reserve's policymaking arm will begin a two-day meeting today that will conclude with a rate decision Wednesday. While economists expect the key interest rate to remain unchanged near zero, the market is eager to see whether encouraging economic data will be cited in the committee's statement. Market watchers will also be interested in whether the committee discusses any future quantitative easing plans.

 

President Barack Obama is expected to focus on the economy and improving job creation when he gives his State of the Union address at 9 p.m. ET.

 

Crude oil for March delivery was losing $1.21 at $86.66 a barrel. The February gold contract was down by $19.20 at $1,325.30 an ounce.

 

The dollar weakened against a basket of six currencies, with the dollar index down by 0.02%. The benchmark 10-year Treasury fell 1/32, lifting the yield to 3.409%.

 

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72Comments
Jan 25, 2011 9:53AM
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Every State of the Union speech is the same thing - more gov programs that cost more money.  For once, I would love to see the Prez get up there and say, "Folks, we're hemorrhaging money and we have no choice but to face this problem head-on.  It will mean that all Americans will have to make sacrifices so that we can get our fiscal house in order.  Here is my plan that will cut total fed gov expenditures by 15%, beginning this year.  I challenge Congress to find another 15% that can be eliminated."

But we all know better, this Prez, just like the last Prez and the one before that and the one before that will make a big show out of cutting 1 tenth of 1% of discretionary spending and then he will outline proposals, er, spending programs that, if implemented, would add another several hundred billion dollars to our budget.  I think there's some organization somewhere that keeps track of the expected costs of all the State of the Union spending proposals - I would expect this year it will tally more than $500 billion.

I'm also expecting the usual - spend more money on education, give tax breaks to companies who get rid of indoor plumbing and install more efficient outhouses in the parking lot, spend more money on seniors, spend more money on the poor, subsidize more green energy and more environmental projects, subsidize more internet access and more flatulence meters, have faith in the workings of the federal gov and blah, blah, blah, competitiveness, the most competitive nation in the world, compete, compete, higher minimum wage, more union jobs, blah blah blah.

Jan 25, 2011 11:20AM
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Mr Fat Cat said  "There isn't one guilty party. Everyone participated."

 

 First of all not everyone did participate (although I do agree that too many did) but the real point here is who created this foolish scheme?  Was it the little guy who was 'sold' on the idea houses were now ATM's or the "Fat Cats" who walked away with millions even after many had destroyed their companies?  Maybe I'm old fashioned but when the **** the fan I place most of the blame on the leadership and in this case the captains of the financial industry bear most of the blame. 

Jan 25, 2011 11:48AM
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Deklen...

 

First off I ama proud W voter.   And you cannot blame W anymore, not with the current nit wit driving the economy down even further for over 2 years.  Witness the unmemployment rate, his avowed #1 priority, drive from 7.1% to 9.8%. (Currently 9.4%).  

 

Obama has to be the dumbest President in my lifetime.  He has made more gaffes than any of them.   His solution is always to SPEND more money.  He thinks insuring 31 millipon additional high risk people will lower healthcare costs...  Maybe theres, the the rest of will pay.

If government spending were the secret to economic prosperity we would be booming with growth at 10% and zero unemployment.   Unfortunately, government spending SLAMS on the economic brakes.  After running up 4+ Trillion in debt in 2 years, and untold stimulus spending things just are worse. 

 

The real problem is Democrats.  They believe in socialism, redistribution of the wealth via taxation, and failed government.   The people fired 2000 of them in November, and Obama and his remaining minions STILL believe more spending (renamed Investment for tonights partisan speech) is the answer...

 

We clearly need to fire another 2,000 Donkeys in 2012, starting with Heinz 57 Obama...

Jan 25, 2011 11:57AM
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The Consumer Confidence Index number is based on consumer spending and consumers spent more on food, heating oil and gasoline in January.  They didn't buy anymore they just paid more especially in gasoline.

 

Its going to be interesting to see what comes out of the Feds policy meeting the next two days.  If the economy is getting as robust as we are led to believe then the Fed should have no problem in discontinuing QE 2  and POMO.   Bernanke has already stated he will keep Wall Street up in order to generate consumer confidence.  His reasoning is that as long as the consumer sees Wall Street making gains the economy must be okay,( that and he is making a fortune as a shadow trader).  The problem the consumer is starting to realize that Wall Street may be up but the consumer dollar is shrinking as is income.

Jan 25, 2011 3:15PM
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I consider myself a Moderate Conservative. 

 

I am a Liberal because I see a need for taxation for basic government services, and also see the benefit from wise government spending programs.  Where would we be without the Hoover and Glen Canyon Dams or the Interstate Highway System?  Certainly our economy has expanded and our nation has benefited greatly from these and many other spending programs.

 

I am a Conservative when it comes to pork and useless government spending.  These types of government spending simply serve to line the pockets of special interest groups and political alliances and does nothing stimulate economic growth and serves to erode our society.

 

I am a Liberal when it comes to equality.  Equal rights and opportunities for all.

 

I am a Conservative when political correctness runs amok and your rights for equality infringe upon my rights for opportunity (and vice versa).

 

Unfortunately today, being a Moderate in today's political climate means that in order for me to get my bad idea passed, I need to vote for your bad idea; or worse, let's combine the two bad ideas together so we both can vote for both bad ideas together. 

 

And what we are left with is bad legislation.

 

Our government has been borrowing from Peter to pay Paul for far too long now, ((before Obama, before Bush, before Clinton, before Bush, before Reagan, etc) and it finally came close to an end 2 years ago.  And it would have ended except that Peter lent the government a whole bunch of money and Paul decided to hold off collecting his debt. 

 

And we call this recovery?  Who are we kidding?

 

 

Jan 25, 2011 9:31AM
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KUDOS...three cheers for accountability if this is true.

 

Let's see if where this leads...Payoffs or Prison.

Jan 25, 2011 11:09AM
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Mr FatCat-

you sound like a real fun guy.

Someone TP your house last night? Or let the air out of your tires?

Jan 25, 2011 1:11PM
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Mirage guy:  Again I ask.. how did the US have the greatest growth in real production during the 40s when government spending was over 40% of GDP?

 

What are the mechanics for your theory the government spending slows down the economy?  Is there aren't borrowers to invest, what does savings do?  Without demand there's no reason to invest in capital goods.  And so surplus savings sit there.

 

Do you think that gun manufacturers get a boost when the government buys rifles?  What about civil engineering companies when there's a bridge that needs to be redone?  What about the auto assembly workers called back to work after cash for clunkers?  Then there's the additional spending on necessities and minor luxuries that food stamp programs and the EIC brings.

 

In fact.. when you look at 1937 US, and 1997 Japan, you see very clearly that a sudden retraction in spending was cataclysmic.

 

You're on here constantly saying that, but you haven't produced ANY evidence, any supporting documents, ANYTHING to substantiate your statement.  It's only applicable when the economy is expanding, which is exactly what your boy Bush was doing!  Borrowing during expansion and pulling loanable funds from other opportunities.  At least Obama is pulling stagnant money.  I only hope it will cease/taper off when we start expanding again.

Jan 25, 2011 11:03AM
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I regard most of you people a pack of uneducated illiterate fools.
Then you are among your peers here: (from your earlier post)
...latch onto some rational ...
(a noun, not an adjective, is called for here - perhaps you meant "rationale"?)

...fed by human greed and stupidy.
Jan 25, 2011 10:10AM
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Brutus...Great suggestions but those suggestions would require leadership and since when is Obama leading. The politicians in Washington are now focused on the 2012 election. Look at how Obama has pulled back to the center. I just hope people are not fooled, his ideology is still left he is just selling himself again now. Fool me once shame on you, fool me twice shame on me.
Jan 25, 2011 1:23PM
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Active RIA, we can agree on the NEED to cut Military spending first and formost!  Unfortunately we need to cut other entitlement programs as well.

 

As for raising taxes, NO we don't need to do that.   Spending MUST be slashed to equal income.  Anything else just will delay the result.

 

We do not need to raise taxes to support all of Donkey parties spending.   Return to the spending levels prior to the run away spending of the Donkey Party in 2006.   We can then cut spending from there....

Jan 25, 2011 1:53PM
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Wow!  Leave some folks unsupervised for a day and all he** breaks loose.  We recently had a nice chat about name calling and some of us clearly didn't listen.  If we disagree with each other, we gain nothing from that if we don't tell the other guy why we think he's a @#+*!  If we state specifics: IMO your opinion is specious because ______, we could all learn something.

 

Those of us who continue the name calling and repeated rants almost certainly were not named captain of our debate squads.  And the chance of the Dems convincing the Reps (and vice versa) that they're right and the other guys is wrong are just about 0 if they offer no rationale / support for their argument.  Comments without any support waste everyone's time.

 

I apparently incorrectly assumed we were here, sharing investment advice and, when we weren't and we wandered off topic, to educate and influence.  I'd guess a couple of us missed that day in Kindergarten where the teacher patiently explained why we should say please and thank you, why manners might just be a good thing and why it was a bad thing to bite Bobby.

 

Yes, I admit that I enjoy some of the off-topic banter and respect your opinions, no matter how out there I think that they are.  And I disagree with the poster who labeled us all as a "Pack of uneducated illiterate fools" (if I had feelings, they'd be hurt).  I'm not always sure why I'm here, but know it isn't for Charlie's or Melinda's sage investing advice.  I'll let you decide if you are.

 

I'm confident nobody cares, but if virtually no investing advice posts appear here, I eventually might take my bat and go home.  Make your own careful investment decisions or rely on advice from a reputable investment professional (no, I'm definitely not him).  Some of you might try to play nice with the others (you know who your are).  Back to work.  Happy investing!

Jan 25, 2011 12:18PM
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Analyst and economist are like weathermen. They can get it wrong day after day yet still have a job. If they are that smart they should  be the one of the worlds richest men...
Jan 25, 2011 11:00AM
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Can we suspend the partisan name calling for one stinking day?  Even members of Congress are trying to hold hands tonight. Knives out again tomorrow, probably.

 

Too Sick - I was hoping for DOW at 12,000 by end of month.  Maybe?  See you Monday at 4 pm.

Jan 25, 2011 1:38PM
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Tumbleweed, I am a small business owner.   My business will cease when I die.  It will have to be, to pay the estate taxes, I cannot dodge.  So when I die, the doors will close and the 100 employees will have to find other employment.

 

Most of this countries weathy started out dirt poor.  They built their wealth through a good business model, luck and hard work.   Most small business owners are not lazy.  We get to pick our own hours, any 80 a week we want...

Jan 25, 2011 6:31PM
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So MG.. I'm curious, who 's been in office that you HAVE liked?

 

You've said you liked W, but he committed the cardinal offense that you keep railing on here on racking up debt with pointless spending.  And, like I pointed out before, he did so while borrowing was robust and deficits especially damaging.  At the same time the Patriot Act left a boot print across the constitution, and I'm sure you're happy with the Medicare perscription plan.

 

Did you like HW Bush?  Or did the raising taxes thing completely sour you there.  NAFTA probably also wasn't a favorite.

 

What about Reagan with his redistributive policies like EIC expansion, meddling with the market by putting price controls on Medicare while at the same time making emergency rooms unable to take ability to pay into account when treating someone.  Or maybe that he raised taxes as well as lowering them, consolidating capital gains and normal income?  There's the whole war on drugs that started at that point too.

 

Ford, the shorttimer, was probably a favorite.  Education for All Handicapped Children act that drove up public school spending.  Asking for WIN pledges and badges instead of actually doing something about inflation.

 

What about Nixon?  I assume if you have a problem with Clinton's perjury you have a serious issue with Nixon.  At least Clinton didn't lie about anything important to the national stage.  Of course there's also the reopening of China that Nixon's responsible for, expanded direct transfer payments.  I'm guessing that the Equal Employment Opportunity Act and Title 9 really annoy you.

 

Eisenhower who created the department of Health, Education, and Welfare while expanding the new deal programs?

 

My point is that the previous successful "conservative" (Reagan back) presidents wouldn't be allowed near a general election today.  When you look back, they look like moderate democrats.

Jan 25, 2011 1:22PM
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MG:  Or we could use our brains and think rationally instead of rush to extremes.

Jan 25, 2011 1:20PM
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I don't believe in Medicare.   Before Medicare, Healthcare was under 4% of the economy, today it is over 15%...  The net effect is that government has driven up the cost side by 400%+, and driven down the quality.

I wonder if the additional reserach has anything to do with the increased costs.  Of course, before Medicare we just let the elderly expire if they couldn't pay for it.  Last I noticed people are living longer than they were in 1965 when Medicare was established and that those over 65 are VERY happy with their plans.  Tghe sign "Keep you big government hands off my medicare"

 

I'm curious what will happen when your private insurer won't cover you anymore and you're too expensive for the private market TO extend coverage to.  All of us under 70s or so are really cheap compared to people in their last month or so of life.  I think I remember reading thatr 25% of your entire life's medical expenditures happen in the last month.

Jan 25, 2011 12:17PM
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hey mirage guy, are you healthy and who pays your health insurance?
Jan 25, 2011 12:04PM
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What a bunch of Idiots!...The only problem with the Global Economy is the analyst/economist...​Their forcasts are ALWAYS wrong and if companies hit it or beat it, they find reasons to minimize the effort...Real Idiots!
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