U.S. stocks closed nearly flat Tuesday, pressured by disappointing earnings from Hewlett-Packard (HPQ) and a credit downgrade of France last night by Moody's Investors Service. Remarks today by Federal Reserve Chairman Ben Bernanke also worked to dampen market attitudes. Most industry sectors in the S&P 500 tilted lower throughout much of the session, led by declines for energy and technology stocks. Shares of financial companies briefly turned lower following the Bernanke speech but recovered enough to finish with small gains. Commodities also fell, including a near-3% drop for crude oil following news of a tentative truce between Israeli troops and Hamas rebels in the Gaza strip.
Speaking today at the Economic Club of New York, the Fed Chairman again warned U.S. political leaders against allowing scheduled spending cuts and tax hikes -- the so-called fiscal cliff -- from taking effect, saying worries over the budget negotiations already are damaging economic growth.
Such uncertainties will only be increased by discord and delay, Bernanke said. In contrast, the Fed chair added, cooperation and creativity to deliver fiscal clarity -- in particular, a plan for resolving the nation's long-term budgetary issues without harming the recovery -- could help make the new year a very good one for the American economy.
Many market participants expect the two remaining credit-rating agencies would strip the country of its AAA rating, joining Standard & Poor's, which cut its rating to AA+ last summer, if lawmakers and the White House are unable to forge a deal in time. The one-notch downgrade of France to AA+ by Moody's was widely expected following a similar S&P downgrade in January but the move still brought new attention to Europe's ongoing fiscal woes and their potential impact on the global economy.
Corporate News
In company news, Hewlett-Packard plummeted, setting a new 52-week low after swinging to a Q4 loss tied to its acquisition of search software developer Automony Corp. last year. The struggling computer-maker wrote down almost all of the $10 billion it paid for Autonomy last year, taking an $8.8-billion non-cash charge for the impairment of goodwill and intangible assets within its Software segment. It claims Automony management misrepresented its performance while the deal was being negotiated, alleging "serious accounting improprieties, disclosure failures and outright misrepresentations." Former Automony CEO Mike Lynch denied any wrong-doing.
Positive Housing Data
Traders did get a piece of upbeat news this morning when the Commerce Department reported a 3.6% increase in new home construction during October to a seasonally adjusted annual rate of 894,000, the highest rate since July 2008. Economists polled by MarketWatch were expected a decline in housing starts to an 825,000-house annualized rate due in part to disruptions caused by Hurricane Sandy.
Crude oil tumbled this afternoon following reports of a tentative ceasefire in the Middle East, with the front-month January falling $2.53 -- or nearly 3% -- to settle at $86.75 per barrel. December natural gas rose 11.3 cents to $3.832 per 1 million BTU. December gold fell $10.90 to $1723.70 per ounce while December silver fell 19 cents to $32.96 per ounce. December copper fell 1 cent to $3.52 per pound.
Here's Where The Markets Stood At Day's End
- Dow Jones Industrial Average down 7.45 (-0.06%) to 12,788.51
- S&P 500 up 0.93 (+0.07%) to 1,387.82
- Nasdaq Composite Index up 0.61 (+0.02%) to 2,916.68
- Hang Seng Index down 0.16%
- Shanghai China Composite Index down 0.40%
- FTSE 100 Index up 0.18%
- (+) (SCHS), Reports per-share fiscal Q2 earnings of $0.75, up from $0.47 in the year-ago quarter and beating analyst expectations by $0.01. Revenues slip 5.8% to $236.9 million, largely in-line with expectations.
- (+) KKD, Forecasts adjusted FY13 earnings of $0.44 to $0.47 a share, topping analyst expectations by at least $0.02. Adjusted Q3 EPS, revenues also beat estimates by wide margins.
- (+) DAKT, Reports better-than-expected Q2 financial results, posting $0.27 a share profit, up from $0.09 during same three months last year. Revenue rises 10% to $149.9 million. Analysts, on average, had forecast net earnings of $0.15 a share on $142.7 million in revenue.
- (+) GRPN, Tiger Global Investments LP late yesterday discloses a 9.9% stake in the daily-deal company. Person familiar with Tiger Global told the Wall Street Journal the investment is passive, not activist."
- (+) ASTX, Said its SGI-110 drug candidate was well tolerated in patients with leukemia or myelodysplastic syndromes at doses higher than the biologically effective dose during Phase I/II testing.
- (-) HPQ, Tumbles to new 52-week low after posting Q4 loss tied to 2011 acquisition of Automony Corp. Writes down most of the $10-billion price tag for the search software firm, alleging Autonomy managers seriously misrepresented its performance. Q4 results top Street but Q1 forecasts trail expectations.
- (-) SHF, German drug-maker Bayer declines to raise offer after Reckitt Benckiser last week bid $1.4 billion for the U.S. vitamin seller.
- (-) BBY, Q3 adjusted earnings of $0.03 a share trail the analyst consensus by $0.09. Revenue falls 4% to $10.75 billion, beating expectations by about $30 million. Cuts projected free cash flow in FY13 by as much as $450 million to a new range of $850 million to $1.05 billion.
- (-) IMOS, Forecasts Q4 revenue to be flat to 5% lower than Q3, when chip testing company generated $175.5 million in sales, due to softness in broader memory market. Reports Q3 EPS of $0.46, up from $0.18 the same quarter last year.
- (-) PDCO, Reports Q2 earnings of $0.44 per share, up a penny from last year but trailing the analyst consensus by $0.05. Revenues were up 1.2% year over year to $867.19 million, also missing estimates.