Home report, earnings weigh on stocks

A key index of housing prices increases less than expected. Shares of steelmakers tumble after quarterly results miss estimates. Consumer confidence rises more than forecast.

By TheStreet Staff Oct 26, 2010 8:02AM

TheStreetBy Melinda Peer, TheStreet

 

Updated at 1:30 p.m. ET

 

Stocks were flat Tuesday after shares of basic materials companies fell on weak quarterly results and a gauge of home prices rose less than expected.

 

At 1:30 p.m. ET, the Dow Jones Industrial Average ($INDU) was down by 12 points, or 0.1%, at 11,152. The S&P 500 ($INX) was down by 1.3 points, or 0.1%, at 1,184. The Nasdaq ($COMPX) was up 7.3 points, or 0.3%, at 2,498.

 

The weak housing market continues to fuel doubts about the economic recovery. The S&P/Case-Shiller 20-city August home price index rose 1.7% from August of last year, less than the 2.1% increase economists expected. The Federal Housing Finance Agency's house price index rose 0.4% in August after declining 0.5% in July.

The Conference Board's confidence index rose by 1.6 points to 50.2 in October from a revised 48.6 in September. Economists had expected an increase of 0.5 point, according to Briefing.com. Concerns about consumer spending, which accounts for two-thirds of gross domestic product, have persisted in recent months.

 

”The mood is improving, but progress is slow -- not unlike the pace of the growth in the economy itself,” said Jim Baird, partner and chief investment strategist for Plante Moran Financial Advisors.

 

The basic materials sector has been the day's worst-performing industry, pressured by disappointing results from U.S. Steel (X) and AK Steel Holding (AKS), and warnings for weak demand from ArcelorMittal (MT).

 

U.S. Steel (X) lost 35 cents a share in the third quarter, which included currency gains of 96 cents. Analysts had predicted a profit of 23 cents a share, according to Briefing.com. The stock was down 4.9% to $40.20.

 

AK Steel Holding (AKS) shares were falling 4.2% t0 $12.80. The company posted a third-quarter loss of $59.2 million, or 54 cents per share, because of rising material costs.

 

ArcelorMittal (MT), the world's largest steelmaker, said third-quarter earnings jumped 48% to $1.35 billion as sales increased 30%. But the company lowered its expectations for the rest of year, causing its American depositary receipts to lose 5.5% at $32.90.

 

Bank of America (BAC), American Express (AXP) and Verizon (VZ) were leading the Dow. DuPont (DD), United Technologies (UTX) and Caterpillar (CAT) were the biggest laggards.

 

DuPont (DD) said third-quarter earnings fell 10% to $367 million, or 40 cents a share. While the company beat the 34-cent average estimate of analysts and boosted its full-year forecast, DuPont shares were dropping 1.6% to $46.96.

 

TD Ameritrade (AMTD) said third-quarter net income fell 27% to $114 million, or 20 cents a share, as sales slipped 7.5% to $608.8 million. Analysts had expected earnings of 23 cents a share on sales of $619 million. The stock was losing 1.2% to $16.55.

 

Ford's (F) third-quarter net income jumped 70% to $1.7 billion, or 43 cents a share. The company posted a pretax operating profit of 48 cents a share. Analysts had forecast a profit of 38 cents a share. Ford shares were up 0.4% to $14.23.

 

Shares of handbag maker Coach (COH) jumped 9.8% to $48.84 after it posted a third-quarter gain of 63 cents a share on sales that were 20% higher at $991.7 million. The results exceeded Wall Street’s expectations for profits of 55 cents a share on sales of $846.8 million.

 

Shares of Bristol-Myers Squibb (BMY) were down 0.6% to $27 after the drugmaker said earnings fell 2% to $949 million, or 55 cents a share, beating the 53-cent average estimate. Sales were flat at $4.8 billion, falling short of expectations for $4.92 billion.  

 

Texas Instruments’ (TXN) shares were falling 1% to $28.68 after the company said Monday that sales would decline in the fourth quarter.

 

Crude oil for December delivery was shedding 14 cents at $82.66 a barrel. The American Petroleum Institute today will issue its weekly read on crude oil inventories for the week ended Oct. 22. Analysts polled by Platts expect a build of 1.5 million barrels.

 

The December gold contract was losing $1.90 to $1,337 an ounce. 

 

The dollar was trading higher against a basket of currencies, with the dollar index up by 0.6%. A better-than-expected report on existing-home sales lifted stocks Monday.

 

The benchmark 10-year Treasury note declined 8/32, strengthening the yield to 2.594%.

 

Hong Kong's Hang Seng fell 0.1%, while Japan's Nikkei shed 0.3%. The FTSE in London was declining 0.8%, and the DAX in Frankfurt was slipping 0.4%.

 

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81Comments
Oct 26, 2010 12:29PM
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Volker,

IMO, we could have jumped from the 3rd floor window, put a few band-aids on, maybe added a splint and a few stitches, then dusted ourselves off and limped away.  But no, we had to get on that stupid 1-way elevator and last time anyone checked, we were about half a mile underground and still falling.  China, here we come!!

I don't think we can grow our way out of the real estate problem until we finally hit bottom.  But those in charge aren't letting us hit bottom, so the uncertainty continues.  We won't be able to get a good read on the state of residential or commercial real estate until the real set of books are opened up and the millions of properties of "shadow inventory" are allowed to hit the market, or are at least acknowledged to exist.

I know of a family that has not paid a single mortgage payment in 16 months and they haven't been officially foreclosed on or told to leave their home.  How many others are in this position?  Again, the uncertainty is killing the economy.

Oct 26, 2010 12:36PM
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If you wantto read some interesting stuff about the deficit and taxes etc, read the article about the mortgage deduction on the MSN home page today and the WSJ comments imbedded in the article. 

 

It brings home the point that any simplistic "cut taxes" or "cut gov't waste" posturing by politicians is just that. Simplistic bombast.

 

If you want an example of mature and responsible gov't, watch what the Brits are proposing(conservative/liberal party coalition) - making the tough decisions of reducing gov't programs and raising taxes to balance the budget.

Oct 26, 2010 10:23AM
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The market is up 1,500 points in the past 2 months but is still down over 2,300 points from Fall of 2006. Makes one wonder why it started down in October 2006 and started up in the fall of 2010. Could it just be that it might have something to do with the election of the branch of the government that writes laws? Most people want to blame the President for bad/good times; however, he does not write the laws. I have done very well by following this system since the early 1990. I got out in the fall of 92, back in in fall of 94 and out in the fall of 2000, back in in the fall of 2002 then out in 2006 and have been moving back in since the spring of 2010.
Oct 26, 2010 4:46PM
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Gridlock is preferable to the socialist path Odumba is taking us down...

 

Society cannot survive when one can steal from someone else via voting.  The have nots will always vote to have those with moeny to give it to them...

 

Government is out of control with spending.  We MUST SLASH government spending.  We cannot afford the entitlements we have and with healthcare now expected to ADD trillions to the deficit, we are in DEEP toruble.  Odumba has increased the debt over 3.2 Trillion already, and he is likely to reach 7 trillion before he leaves office...

 

Vote the Donkeys out of prepare for the "Decade of Prosperity" as good as their recovery summer!

Oct 26, 2010 2:44PM
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Re-tog.  No I wasn't aware of that.  I am completely speculative .  And will happily eat crow, if she drops afterhours.  Just having fun.  Not betting the farm.

I do not post here to tell others to buy, or influence decisions.  Just like talking stocks, and put actual trades on the line, maybe for honesty and credibility reasons.  I would like other people to make money, like I have.  I believe in sharing information.  What's in it for me? Nothing.  As far as my ability in the market, let's just say I have logged some 20 K profit months, I have traded a estimated 300 times the past couple years, 5 of which lost me money.  Trading the same good companies over and over, like DOW, GE, GS.  If I had any patience, those loses would have resulted in huge gains like 3000 shares of SOA at $ 2.5, sold for 50 cent  lose, the stock is now 18.  This is a part time gig.  And it is fun for me. I am heavily invested in real estate, my real love and passion.  Not looking for followers, it is a dirty word in my family.  Never being one myself.  Enjoy your ranch.  I enjoy your posts.

Oct 26, 2010 1:10PM
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I truly believe are only real task in life is to overcome fear.  Because when we can do that, we can finally truly love.  Which is our highest vibration and purpose.  I know it sounds like I have been puffing the dragon, or eating too much scrapple.  Go ahead, let me have it. 
Oct 26, 2010 1:02PM
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2-Sick.. and what I'm saying is that healthy firms that aren't insovlent become so as a result of those firms failing in a catastrophic manner.  Firms that re-package MBSes that were good still found that their assets were worthless because the market was flooded with them.  No matter the quality of the underlying loan, they bore basically 0 value.  It would be like if the chocolate who cornered the market in cocoa not long ago filed chapter 7 and was compelled to liquidate his assets.  You, if you were holding cocoa, would be screwed because your perfectly good holding would be relatively worthless due the to quantity in the market.
Oct 26, 2010 12:59PM
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IMO, uncertainty is everything right now.  Uncertainty about taxes, health care mandates, regulations, etc... are preventing businesses from hiring.  Uncertainty about taxes and jobs are preventing consumers from spending money, buying houses, etc...  Uncertainty about future economic stability and interest rates is preventing banks from loaning money.  Uncertainty about fin reg and the future of the economy is leading to regular investors pulling billions out of the market.
Oct 26, 2010 12:48PM
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Brutus:  You have outlined the exact person that should be thrown out of their home.  And I bet they would if the bank didn't resell the loan so many times that they can't find who actually owns it!  Normally, when I hear something like that, there's a lot more to the story than is being shared.

 

I fail to see how your conclusion of "uncertainty is killing the economy" is linked though.  And.. I don't know if you noticed but we're chugging along pretty well.  70% of the way back to our previous peak from the trough.  Consumer confidence growing.

Oct 26, 2010 12:43PM
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2 Sick, The question is how housing keeps up with incomes on an ongoing basis.  We say that housing took a serious dive from their 2006-2007 levels in comparason with incomes.  But what happened between 1990 and 2000?  Was there a natural shift in the perceived value of a home?  I know homes in my area appreciated about 50% or so from 1990 to 2000, and about 70% from 2000-2006, then retracted to be about a 50% increase from 2000 levels.  We had a little wave, not a tidal wave like other areas did.
Oct 26, 2010 12:12PM
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Iggy.  Boy I hate this new system here.  I swear half of my posts don't go through.  Anyway.

Oversold is a position when the supple of sellers has dried up, shorts go long, and new buyers come in faster then sellers, thus share price rise.  It is more dramatic when a stock has peaked, at it's low or high, because now you have a momentum shift, which can be quite dramatic.  Here's the catch, the overall market is overbought now.  IMO. A ideal situation is a oversold market, and oversold stocks.  This was what happened last year in March/ April . Now you are talking easy money.

Oct 26, 2010 10:41AM
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Timing is everything.  Especially when you get it right.

Dharma,  I agree, and this applies to life, not just investing.  However, when it comes to timing the market, good luck with that project.  Consider this - According to Money Magazine (April 2008), had you invested in an S&P 500 index fund in August 1997 and sat tight for 10 years, you’d have racked up an 88% return. Had you missed just the 20 best days in the market over that period, you would have had a 20% loss!
Oct 26, 2010 10:34AM
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diditonce,

Your theory doesn't make much sense they way you wrote it.  You got out in 1992, presumably because Dems won the WH and held Congress.  Then you bought back in 1994, presumably because Repubs took control of Congress.  But why did you sell in 2000 - Dems didn't keep the WH or take back control of Congress?  And why buy back in 2002? - nothing changed politically.

Is this really your investing strategy or does it just sound good when you say it?

Oct 26, 2010 10:29AM
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didit.  Timing is everything.  Especially when you get it right.
Oct 26, 2010 10:21AM
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Consumer confidence index back above 50.  Home prices are still pretty suppressed.  As usual, things could be much better or much worse.  Seems like we are headed for another low volume day.  I doubt things move much lower or much higher.  Of course the dollar is a little stronger today, so a corresponding dip in stocks is to be expected.
Oct 26, 2010 10:20AM
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Nice move back up on GE today.  And my ENTG is moving up big time.  And how about that HUN I have been pushing, 52 week high coming up.  Ciao!
Oct 26, 2010 9:14AM
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Election on the way, news will be invented and good about the economy.  What about the 20 million people, who's unemployment will run out, and have to invent good economic news for themselves.
Oct 26, 2010 8:44AM
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It's a fine fall day, the tea leaves are turning red, a minor market correction. No real change till the elections get digested. Funny how the fall weather brings out the hibernation instinct after all these eons.
Oct 27, 2010 12:38AM
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It is very late, it is like drinking and dialing.  Truth comes out.  We, you , me and everyone else are at a great precipitous of change.  We want something different.  Don't we?  A better life, full of success or whatever we think our little minds want?  What is that change?  I really believe if we can move in accordance to what we want, we can find the joy we deserve, and succeed as necessary.   Fulfilling all the expectations we command from ourselves and life.
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