Markets are weighed down by disappointing earnings

By Christina Rexrode

Associated Press

Published: Monday, Oct. 22 2012 10:10 a.m. MDT

Specialist Patrick Kenny, right, works at his post on the floor of the New York Stock Exchange Monday, Oct. 22, 2012. A weak forecast from heavy equipment maker Caterpillar and other poor earnings results weighed on the U.S. stock market in early trading.

Richard Drew, Associated Press

NEW YORK — Investors seemed to be in a holding pattern Monday, unwilling to send the market definitively up or down. Indexes hopped between small gains and losses and investors waited for clarity on third-quarter earnings and the presidential election.

Developments that could move the market are coming soon. Yahoo, a proxy for how the tech industry is doing, will report earnings after the market closes. Bellwether companies like Apple and Procter & Gamble report later this week. The government releases its report on third-quarter economic growth on Friday. And two weeks from now, the U.S. holds its presidential election.

"It's very quiet out there," said David Katz, principal and senior portfolio strategist at WeiserMazars Wealth Advisors in New York. "A lot of that is just the election, or Monday night football — one or the other."

The Dow Jones industrial average and the Standard & Poor's 500 dipped when the market opened, then struggled for direction. The moves were small.

The Dow was down 14 points to 13,324 at noon. The S&P 500 was down two at 1,431 and the Nasdaq composite index inched up six points to 3,012.

Company earnings signaled that the economy isn't at full bore, though investors' reactions were mixed.

Hasbro, the toymaker behind brands like My Little Pony and Transformers, said that sales for boys and preschool were less than it had hoped. But the company's results beat analysts' expectations, and the stock inched up 24 cents to $39.29.

Clothing maker VF Corp., whose brands include The North Face and Wrangler, slipped after its revenue fell short of analysts' estimates. The stock fell $5.62 to $161.15

Caterpillar, the world's largest construction and mining equipment company, cut its profit and revenue predictions for the year, saying the global economy is weaker than it previously thought. But profit and revenue both increased, and the stock rose 99 cents to $84.85.

SunTrust Banks slipped after announcing its quarterly results. Earnings were sharply higher, but that was largely because the bank sold shares it owned in Coca-Cola. The Atlanta-based bank wrestled with higher expenses as well as low interest rates, which can crimp the profit banks make from lending out money.

The markets just got through the first peak week of third-quarter earnings reports. On Friday, disappointing results from Microsoft, General Electric and McDonald's surprised traders and pushed U.S. stocks lower.

While most companies have pulled in better-than-expected earnings, investors now are more interested in how they're doing on revenue. Revenue can give a more accurate picture of how a company is performing, because earnings can vary widely on items like accounting charges and cost-cutting.

Katz described companies' third-quarter revenue results as "fair" and said the U.S. economy is "slow and steady."

"It is at a snail's pace," he said. "But it's certainly better than what we had."

Of the roughly 100 companies in the S&P 500 that have reported third-quarter results so far, 70 percent have beat analysts' estimates for earnings, according to John Butters, senior earnings analyst at FactSet. But only 42 percent have beat estimates for revenue. That's the lowest since the first quarter of 2009, when the stock market hit its Great Recession lows.

Ancestry.com, the genealogy website, jumped after announcing it will be bought by European private equity firms. The stock popped $2.28 to $31.46. The buyers had offered $32 per share.

In other trading, the yield on the 10-year Treasury note rose to 1.80 percent from 1.76 percent late Friday. The euro was worth $1.30, little changed from Friday, and energy prices fell slightly. Crude oil fell 66 cents to $89.78 a barrel in New York.

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