By Sarah Jones - Jul 19, 2013 4:46 PM GMT+0400
U.S. stock-index futures (SPA) were little changed, indicating benchmark equities gauges will remain near records, as worse-than-estimated earnings from Google Inc. and Microsoft Corp. (MSFT) offset China’s decision to remove the floor on lending rates.
Microsoft, the world’s largest software maker, plunged 7.5 percent and Google Inc., owner of the most popular Internet search engine, lost 2.7 percent. GE added 1.6 percent as second-quarter profit topped projections.
Traders work on the floor of the New York Stock Exchange in New York. Photographer: Scott Eells/Bloomberg
Futures on the Standard & Poor’s 500 Index expiring in September fell 0.1 percent to 1,678.80 at 8:44 a.m. in New York. Contracts on the Dow Jones Industrial Average (INDU)lost 27 points, or 0.2 percent, to 15,454.
“We’ve seen some winners and some losers coming through,” said Henk Potts, who helps oversee $282 billion as an equity strategist at Barclays Plc’s wealth unit in London. “There has been disappointment around technology, but we don’t necessarily think that is going to be a long-term trend. Earnings have held up reasonably well.”
Futures erased losses of as much as 0.3 percent after the People’s Bank of China said it will remove the floor on lending rates offered by financial institutions starting tomorrow. The announcement builds on pledges by Premier Li Keqiang to expand an overhaul of interest rates, a development the World Bank says must be a priority in reform of the financial system.
Earnings Reports
U.S. stocks rallied yesterday, sending the S&P 500 and the Dow average to records, as earnings from Morgan Stanley and UnitedHealth Group Inc. beat estimates and jobless-benefit claims declined to a two-month low. The S&P 500 has climbed 0.6 percent this week, on track for a fourth straight gain, and is up 18 percent this year.
Federal Reserve stimulus and better-than-forecast corporate earnings have helped fuel a surge in stocks worldwide, with the S&P 500 jumping as much as 150 percent from its March 2009 low. Yesterday’s rally pushed the gauge’s valuation to 15.3 times estimated profit, the highest since April 2010, data compiled by Bloomberg show.
Investors have increasingly turned to stocks this month, as equity exchange-traded funds and mutual funds are attracting money at the fastest rate since January. Investors pulled in about $27 billion to equity ETFs so far in July after $19.1 million of outflows in June, according to Bloomberg data tracking about 1,500 securities.
Fund Flows
Mutual funds that invest in U.S. shares had $4.55 billion of inflows during the week through July 10, ending seven consecutive weeks of withdrawals, according to data from the Washington-based Investment Company Institute released yesterday.
Per-share earnings topped analysts’ estimates at about 72 percent of S&P 500 members that have reported for the quarter so far by an average of 2.6 percent, Bloomberg data show. About 53 percent have beaten revenue projections.
Earnings from technology companies have disappointed the most among 10 groups in the S&P 500. The 17 companies that have reported have missed estimates by an average 3.6 percent. Analysts predict the group will report a 6.7 percent decline in profit, compared with a 2 percent increase estimated for the S&P 500 as a whole.
Microsoft sank 7.5 percent to $32.77 after the company said fourth-quarter profit missed analysts’ projections by the biggest margin in at least a decade amid weaker demand for personal computers running Windows.
Google Miss
Google (GOOG) dropped 2.7 percent to $886.04 after second-quarter sales and profit fell short of estimates as mobile advertising crimped average prices.
Advanced Micro Devices Inc. (AMD) plunged 11 percent to $4.14 even after its sales forecast topped some estimates. Credit Suisse Group AG and Morgan Stanley lowered theirrecommendations on the shares to the equivalent of sell.
The technology results followed disappointing reports from Intel Corp., which fell the most in the Dow yesterday, and EBay Inc., which tumbled 6.7 percent, the most since August 2011.
Financial companies in the S&P 500 have outperformed the average, with 80 percent of the firms reporting earnings that surpassed estimates by an average of 8.7 percent. Banks and insurers are forecast to report earnings growth of 21 percent this quarter. Excluding financial stocks, analysts predict S&P 500 companies will report a 1.4 percent drop in profit, according to Bloomberg data.
SunTrust Profit
SunTrust Banks Inc. rose 1.5 percent to $34.80. Georgia’s biggest lender said second-quarter profit rose 35 percent as bad-loan provisions fell and income from investment banking andwealth management grew.
GE gained 1.6 percent to $24 after demand for jet engines and drilling equipment drove the company’s order backlog to a record. Adjusted profit from continuing operations fell 8 percent to $3.7 billion, or 36 cents a share. That exceeded the 35-cent average analyst estimate.
Honeywell International Inc. (HON) increased 0.6 percent to $83.50. The maker of cockpit controls and thermostats reported second-quarter earnings of $1.28 a share, beating the average analyst estimate of $1.21. The company also raised the lower end of the its full-year profit forecast.
To contact the reporter on this story: Sarah Jones in London at sjones35@bloomberg.net
To contact the editor responsible for this story: Andrew Rummer at arummer@bloomberg.net
