September 29, 2023

Stocks & Bonds: Earnings Optimism Checked by Oil Prices

Worries increased over the costs of raw materials and the effects from Japan’s earthquake.

“Companies are going to be trying to dampen expectations for the second quarter,” said Subodh Kumar, chief investment strategist at Subodh Kumar Associates in Toronto. “The market focus is more internal as to whether it’s gone up too fast.”

After the bell, the aluminum maker Alcoa reported a first-quarter profit that beat estimates and said its outlook for the rest of 2011 and beyond remained positive. But revenue of Alcoa, the first Dow component to report quarterly results, missed forecasts. Shares fell less than 1 percent in regular trading, to $17.77, then fell more than 3 percent in after-hours trading.

Shares of energy companies dropped as oil prices slid on profit-taking. Occidental Petroleum fell 3.2 percent, to $100.42, while the Standard Poor’s energy index was down 1.9 percent.

Profits for companies in the Standard Poor’s 500-stock index are likely to be up 11.4 percent from a year ago, according to Thomson Reuters data, but much of that may be priced into shares.

Optimism over earnings contributed to recent gains, despite turmoil in oil-producing regions and the disasters in Japan. Despite the S. P. 500’s gains this year, light trading volume has prompted questions about the strength of the rally.

The Dow Jones industrial average rose 1.06 points, or 0.01 percent, to 12,381.11. The Standard Poor’s 500-stock index fell 3.71 points, or 0.28 percent, to 1,324.46. The Nasdaq composite index lost 8.91 points, or 0.32 percent, to close at 2,771.51.

Oil futures ended lower after a recommendation from Goldman Sachs to take profits after the recent rally led to a sell-off.

In corporate news, Tenet Healthcare said it had sued a rival hospital operator, Community Health Systems, claiming that Community had admitted patients for unneeded stays to overbill insurers, including Medicare. Shares of Tenet sank 14.7 percent, to $6.44, while Community slumped 36 percent to $25.89.

NYSE Euronext on Sunday rejected a joint buyout bid from Nasdaq OMX Group and Intercontinental Exchange and said it was sticking with an earlier bid from Deutsche Börse. Nasdaq reaffirmed that its offer was higher than Deutsche Börse’s offer.

NYSE shares fell 2.9 percent, to $37.59, while Nasdaq OMX fell 1.5 percent, to $28.03.

Endo Pharmaceuticals, meanwhile, said that it would buy American Medical Systems Holdings for about $2.6 billion while Level 3 Communications agreed to buy Global Crossing for $1.9 billion in stock.

Endo rose 0.5 percent, to $41.06, while American Medical jumped 32 percent, to $29.50. Level 3 rose 18.1 percent, to $1.70, and Global Crossing surged 69 percent, to $24.97.

Biogen Idec rose 7.2 percent, to $78.55, and was the top percentage gainer on the Nasdaq 100 after the company’s experimental multiple sclerosis drug met the main goal in the first of two important late-stage studies.

The dollar firmed against the euro after Congress reached a last-minute budget deal Friday night that avoided a government shutdown. However, a focus on the debt ceiling could limit any gains, traders said.

“The euro’s drop is nothing more than white noise and the pullback should prove shallow,” said Jessica Hoversen, foreign exchange and fixed-income analyst at MF Global in New York.

The Treasury’s 10-year note fell 1/32, to 100 11/32. The yield was unchanged from Friday at 3.58 percent.

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