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GLOBAL MARKETS-Weak earnings hit shares, boost demand for U.S. Treasuries

by on October 26, 2012 6:59 pm BST
 

Fri Oct 26, 2012 2:59pm EDT

* Wall St little changed in volatile session; Apple trades
flat

* U.S. Treasuries climb in price with safe-haven support

* U.S. 3rd-quarter economic growth accelerates to 2 percent

By Angela Moon

NEW YORK, Oct 26 (Reuters) – Global shares fell on Friday as
lackluster corporate earnings reports undermined investor
confidence while U.S. Treasuries climbed with safe-haven
support.

Although data showed a pick-up in U.S. economic growth in
the third quarter, gloomy earnings and outlook statements from
major global companies such as Apple and Amazon
, South Korea’s Samsung and Renault and
Ericsson in Europe corroded hopes of a recovery in
the global economy.

U.S. stocks were little changed by late afternoon trade. The
day’s move was largely dictated by volatile swings in Apple
shares which were trading down 0.4 percent at $607.34, after
falling as low as $591.00.

U.S. gross domestic product expanded at a 2.0 percent annual
clip, accelerating from the second quarter’s 1.3 percent. But
the better-than-expected data was not be enough to stem a recent
slide in the market, which has caused the S&P 500 index to drop
3.3 percent over the past six sessions, its worst 6-day run in
five months.

Lighter revenues have been a concern this earnings season.
Just 36.9 percent of S&P 500 companies so far have reported
revenue that beat forecasts, compared with the 62 percent that
typically exceed expectations, according to Thomson Reuters
data.

“There’s not a lot of chest-beating coming out of these
(company) earnings calls. You still have caution ruling the
day,” said Kurt Brunner, portfolio manager at Swarthmore Group
in Philadelphia.

Earnings have fared better, with 62.5 percent above
expectations, almost even with the 62 percent that is
historically seen.

The S&P 500 has dropped 1.6 percent this week as dismal
corporate earnings and cautious outlooks, especially from large
multinationals, painted a pessimistic picture of the global
economy.

Adding to uncertainty was the U.S. presidential election on
Nov. 6, with the benchmark S&P index below a key support level,
the 50-day moving average, at around 1,434.

Many analysts expect the retreat to wane near 1,400 or
1,375, as the Federal Reserve’s latest stimulus policy puts a
floor under equity prices.

The Dow Jones industrial average was down 12.91
points, or 0.10 percent, at 13,090.77. The Standard & Poor’s 500
Index was down 3.52 points, or 0.25 percent, at
1,409.45. The Nasdaq Composite Index was down 7.51
points, or 0.25 percent, at 2,978.61.

In Europe, shares eked out small gains on Friday with the
FTSEurofirst 300 closing up 0.1 percent at 1,097.35.
The MSCI world equity index was down 0.3 percent
at 328.63.

Late on Thursday, Apple Inc reported a second straight
quarter of disappointing results and iPad sales fell well short
of analysts’ targets. The company also forecast revenue and
margins below Wall Street forecasts.

FLIGHT TO SAFETY

Prices for U.S. Treasuries rose on Friday as disappointing
corporate earnings stoked safe-haven buying, with investors
looking to key jobs data next week, which could affect the
country’s neck-and-neck presidential race.

Benchmark 10-year Treasury notes on Friday were
trading 16/32 higher in price to yield 1.757 percent, down from
1.81 percent late Thursday and just below the 200-day moving
average. Benchmark yields were little changed on the week after
finishing late last Friday at 1.77 percent.

The U.S. government will release October’s nonfarm payrolls
report next Friday. Analysts said that number could not only
shed light on the nascent labor market recovery but also
influence an increasingly tight election for the presidency
between Republican Mitt Romney and Democrat Barack Obama.

A Romney victory could be viewed as good for stocks because
of tax cuts, ING economists said, with an Obama win benefiting
bonds because of the possibility of ongoing Federal Reserve
support for the economy and Treasuries.

Brent oil pushed higher on Friday in choppy trading,
recovering from an early decline. Brent December crude
edged up $1.12 to $109.61 a barrel, after falling as low as
$107.40. U.S. December crude settled up 23 cents at
$86.28 a barrel, recovering after falling to $85.

In the currency market, the euro traded flat against the
dollar following three straight days of losses, but persistent
concerns over whether Spain will ask for a bailout to address
its problems and worries about Greece were expected to weigh on
the currency.

A request by Spain, the euro zone’s fourth-largest economy,
for help would be considered a positive for the euro as it would
allow the European Central Bank to start buying its bonds, which
would lower borrowing costs of the highly indebted country.

The euro hit a low of $1.2881, its lowest since Oct.
11. It last traded at $1.2934, flat on the day.