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U.S. Stocks Pause Ahead of Fed

by on July 31, 2012 3:42 pm BST
 

NEW YORK—Consumer discretionary company shares dragged stocks into the red, and were the biggest losers in a day of mixed earnings and slightly better-than-expected economic data.

The Dow Jones Industrial Average fell 21 points, or 0.2%, to 13052, in Tuesday trading. The Standard & Poor’s 500-stock index fell two points, or 0.2%, to 1383, and the Nasdaq Composite Index fell two points, or 0.1%, to 2944.

Tuesday marks the start of the Federal Reserve’s two-day policy-setting committee meeting. Recent overtures from European central bankers that additional stimulus measures could be on the way have helped fuel stocks, and heightened anticipation for the Fed to signal moves of its own. But disappointing corporate data and economic data reports that some found ultimately unimpressive kept stocks slightly negative.

“We got a mixed bag of earnings reports this morning, and when you couple that with a mixed bag of economic data, and what you end up with is pretty much a stalemate,” said Mike Shea, head of institutional trading with Direct Access Partners. Mr. Shea said that while economic reports were better than consensus, expectations have been lowered.

“Did the number meet the survey? Yes. Was the survey already dialed back? Yes. So everybody greets those numbers and says, we set the bar to about two feet, and stepped over it,” he said.

Consumer discretionary stocks were the worst performers in morning action. High-end leather goods maker Coach

slid, leading declines on the S&P 500, after quarterly revenue fell shy of analysts’ estimates and the company provided a downbeat outlook for the year.

U.S. Steel

jumped after it posted better-than-expected results, which eclipsed its steep drop in sales at the company’s flat-rolled products segment.

Stocks were little moved by readings on economic growth that came in slightly higher than expected. Home prices rose in May for the second straight month, according to Standard & Poor’s Case-Shiller home-price indexes. The Chicago purchasing manager’s index, a barometer of manufacturing health, beat expectations and rose in July, while a separate reading showed U.S. consumer confidence rose more than expected in July. Personal income in June increased and slightly topped forecasts.

Markets have risen on hopes that the Federal Reserve and the European Central Bank will make moves to spur global growth following two meetings on economic policy. Michael Derby reports on Markets Hub. Photo: Bloomberg.

“In this market, the problem with good economic data is that, if you’re looking for a QE trade, maybe then it doesn’t happen as soon as you’d like,” said Rick Fier, director of equity trading Conifer Securities, referring to quantitative easing, the Fed’s asset-purchase program.

“We’re going to see tons of economic numbers this week, ending in Friday’s [monthly jobs report], and still, people aren’t betting on a big rally,” he said.

The Dow industrials traded lower, as investors digested data from the housing market and personal-spending figures, while waiting for the start of a closely watched meeting of U.S. central bankers. Steven Russolillo reports on Markets Hub. Photo: AP.

European markets fell, with the Stoxx Europe 600 down 0.8%, as weak data and disappointing earnings reports weighed on sentiment, offsetting expectations of new stimulus measures from the Fed and European Central Bank.

Swiss banking giant UBS

dropped after recording a trading large loss from complications linked to Facebook’s

initial public offering, and announced plans for legal action against Nasdaq OMX Group

.

U.K. oil heavyweight BP

declined 4.1% after profits sank 96% on a huge write-down of asset values.

Asian markets were mostly higher, with Japan’s Nikkei Stock Average gaining 0.7% and Australia’s S&P/ASX 200 tacking on 0.6%. But China’s Shanghai Composite fell again, losing another 0.3% to another three-year closing low.

In other earnings-related news, Archer Daniels Midland

declined after the company, one of the world’s largest grain traders and processors, missed second-quarter earnings estimates.

Health insurer Aetna

fell despite a second-quarter result that topped analyst projections and an increase its full-year earnings outlook.

Dendreon

slumped slumped after the biotechnology company reported a wider-than-expected second-quarter loss and said it was reducing its workforce by more than 600 employees over the next year as part of a restructuring aimed at cutting costs by $150 million a year.

CafePress

slumped after posting second-quarter loss that widened on higher marketing costs and the e-commerce company offered a downbeat outlook for the second half of the year. The company saw two analyst downgrades before the open.

Cirrus Logic

shot up after the semiconductor maker topped fiscal first-quarter earnings estimates and provided a second-quarter revenue outlook that was well above current projections.

Crude-oil futures fell 1.3% to $88.63 a barrel, while gold futures fell 0.3% to $1,618.90 a troy ounce. The U.S. dollar gained slipped against the euro and the yen. The yield on benchmark 10-year U.S. Treasury bonds fell to 1.488% as demand rose.

Write to Chris Dieterich at chris.dieterich@dowjones.com