Stocks fall before Fed decision

The central bank is expected to announce a plan to stimulate the economy. US companies added 43,000 positions in October. The service sector grows more than forecast. Factory orders rise.

By TheStreet Staff Nov 3, 2010 8:04AM

TheStreetBy Melinda Peer, TheStreet

 

Updated at 1:08 p.m. ET

 

Stocks were falling after better-than-expected job growth in October failed to boost sentiment among investors awaiting results from the Federal Reserve's policy meeting.

 

At 1:08 p.m. ET, the Dow Jones Industrial Average ($INDU) was down by 11 points, or 0.1%, at 11,178. The S&P 500 ($INX) was down by 2.2 points, or 0.2%, at 1,191. The Nasdaq ($COMPX) was losing 7.4 points, or 0.3%, at 2,526.

 

Trading is likely to be light ahead of the Federal Open Market Committee's rate decision at 2:15 p.m. ET. While the overnight lending rate is expected to be unchanged, investors expect the central bank to announce plans to buy back assets to reduce rates. Analysts predict the Federal Reserve will buy $500 billion in bonds.

 

"My hope is that the Fed will have language in there saying that the Fed will continue to do this as long as necessary," said David Chalupnik, the head of equities at First American Funds. "If it does appear to be a one-time effort, then that might be somewhat disappointing to the market."

 

Shares across the basic materials and capital goods sectors were showing the largest declines, while consumer cyclical, financial and transportation stocks held mild gains. American Express (AXP), DuPont (DD) and Alcoa (AA) were the Dow's biggest laggards, while Cisco Systems (CSCO), Bank of America (BAC) and Hewlett-Packard (HPQ) showed the best performance.

 

Automatic Data Processing (ADP) said U.S. companies added 43,000 jobs in October, more than double the 20,000 economists had expected. The number of positions lost in September was revised to 2,000 from 39,000.

The ADP report came hours after Republicans took control of the House of Representatives by promoting plans to add jobs. The government will issue its employment report Friday.

 

The Institute for Supply Management's October services index rose to a 54.3 from 53.2 in September, surpassing expectations for a reading of 53.4.

 

The Commerce Department said factory orders rose 2.1% in September, topping forecasts for growth of 1.7%, according to Briefing.com. Orders were unchanged in August.

 

In company news, shares of Hartford Financial Services (HIG) were up 8.4% to $25.39 after the insurer posted a third-quarter profit yesterday after a year-earlier loss. The company's core earnings of $1.43 a share beat estimates for 97 cents, according to Thomson Reuters.

 

Aetna (AET) shares were climbing 2.6% to $30.75 after the health insurer's third-quarter earnings rose 53% to 84 cents a share, topping expectations for a profit of 67 cents.

 

Rival WellPoint (WLP) also beat expectations, with earnings of $1.74 a share on sales of $14.3 billion. Analysts had expected earnings of $1.57 a share on sales of $14.2 billion. The company's shares were down 1.4% at $54.96. 

 

PulteGroup (PHM) shares were dropping 3.2% to $7.81 after the homebuilder posted a third-quarter loss of $2.63 a share. Sales fell 3% to $1 billion from $1.1 billion a year earlier. Consensus estimates, which exclude nonrecurring items, called for a loss of 5 cents a share, according to Briefing.com.

 

Time Warner (TWX) shares were losing 2% at $31.75 after the media company's third-quarter sales fell short of forecasts. Revenue rose 2% to $6.38 billion, but analysts had expected sales of $6.4 billion.

 

Lloyds Banking (LYG) named Antonio Horta-Osorio, the head of Banco Santander's (STD) U.K. business, its new CEO. He replaces Eric Daniels, who is stepping down. Lloyds shares traded on the New York Stock Exchange were rising 3% to $4.43, while Santander's were falling 1.8% to $12.34.

 

Chesapeake Energy (CHK), Transocean (RIG) and Whole Foods (WFMI) will report results after the closing bell.

 

October car sales will be released this afternoon. General Motors said sales of its core brands rose 13% in October while overall sales ticked 3.5% higher.

 

Crude oil for December delivery was adding 79 cents at $84.69 a barrel. The Energy Information Administration said crude oil inventories increased by 2 million barrels in the week ended Oct. 29, meeting the expectations of analysts polled by Platts.

 

The December gold contract was gaining $1.20 at $1,358.10 an ounce.

 

The dollar was trading lower against a basket of currencies, with the dollar index down by 0.1%. The benchmark 10-year Treasury note was strengthening by 8/32, diluting the yield to 2.565%.

 

The FTSE in London was increasing 0.2%, and the DAX in Frankfurt was adding 0.3%. Hong Kong's Hang Seng jumped 2% higher, and Japan's Nikkei climbed 0.06%.

 

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