BLBG: U.S. Stocks Fall as Goldman Sachs, IBM Miss Revenue Estimates
U.S. stocks fell after revenue missed analysts’ estimates at Goldman Sachs Group Inc., International Business Machines Corp. and Texas Instruments Inc.
Goldman Sachs, the most profitable firm in Wall Street history, tumbled 2.6 percent. IBM, the world’s biggest computer- services company, and Texas Instruments, the second-largest U.S. chipmaker, slumped at least 4.9 percent. Tupperware Brands Corp. sank 15 percent after reporting earnings that fell short of estimates. Pulte Group Inc. and Lennar Corp. slipped after the government said housing starts fell to the lowest since October.
The S&P 500 lost 1.1 percent to 1,060.01 as of 9:35 a.m. in New York. The Dow Jones Industrial Average dropped 123.89 points, or 1.2 percent, to 10,030.54.
“Goldman’s earnings were a disappointment and they reflect a broader problem for the economy,” said Liam Dalton, who oversees $1.4 billion as president of Axiom Capital Management in New York. “We’ve had this gigantic equity rally predicated on a recovery in business activity and now we’re seeing in multiple industries that this activity in tapering off.”
The S&P 500 gained 4.8 percent from July 2 through yesterday on optimism that corporate earnings would signal the economic recovery is sustainable. Of the 42 companies in the S&P 500 that reported since July 12, all but nine beat earnings-per- share forecasts, according to Bloomberg data. While second- quarter net income has topped analysts’ projections by 13 percent on average, revenue has been only 3.3 percent more than estimated, Bloomberg data show.
Stock Volume
Falling stocks generated more trading than rising shares, a sign that the U.S. market may extend its decline from this year’s high in April, according to Bank of America Corp.’s Mary Ann Bartels.
“Higher average volume for 90 percent down days supports the bearish case,” Bartels, ranked second among analysts who study price charts in Institutional Investor magazine’s most recent survey, wrote in a note to clients yesterday. “In July, the 1,100 area is a nearby resistance that has the potential to trigger a pullback.”
Goldman Sachs lost 2.6 percent to $141.86 after reporting second-quarter net revenue of $8.84 billion. The average estimate of analysts surveyed by Bloomberg was for revenue of $8.94 billion.
IBM Slides
IBM sank 5 percent to $123.34. Revenue last quarter rose 2 percent to $23.7 billion, the company said late yesterday. Analysts on average estimated $24.2 billion, according to a Bloomberg survey. Services-contract signings declined 12 percent to $12.3 billion.
“We had a significant decline in contract extensions as a number of large deals rolled out of the quarter,” Chief Financial Officer Mark Loughridge said on a conference call. He said that contract extensions have “little to no benefit to near-term revenue” and IBM increased new business signings.
Texas Instruments slid 4.9 percent to $24.29. Second- quarter profit rose to $769 million, or 62 cents a share, from $260 million, or 20 cents, a year earlier, the Dallas-based company said after the close of U.S. trading yesterday. Sales increased 42 percent to $3.5 billion. Analysts on average estimated profit of 63 cents a share and sales of $3.52 billion, according to a Bloomberg survey.
Johnson & Johnson fell 2.3 percent to $58.18 after cutting its full-year earnings forecast because of the effect of recalls and the suspension of manufacturing at a Pennsylvania plant as well as changes in foreign currency exchange rates.
Tupperware Tumbles
Tupperware tumbled 15 percent to $36.74 as the direct seller of plastic storage containers cut its full-year forecast after second-quarter earnings missed analysts’ estimates.
Apple Inc. and Yahoo! Inc. are among companies scheduled to post quarterly results after the close of U.S. exchanges today.
Housing starts fell in June to the lowest level since October as a slump in sales following the expiration of a government tax incentive caused U.S. builders to cut back. Work began on 549,000 houses last month, fewer than forecast by the median estimate of economists surveyed by Bloomberg News and down 5 percent from May, Commerce Department figures showed.
“We got more misery for the housing sector,” said Eric Mintz, who helps manage $3 billion at Eagle Asset Management in St. Petersburg, Florida. “We continue to slug along in a pretty weak recovery.”
Pulte Group fell 1.6 percent to $7.80 and Lennar lost 2.1 percent to $13.53.
To contact the reporter on this story: Nikolaj Gammeltoft in New York at ngammeltoft@bloomberg.net
