Northwest Arkansas Democrat-Gazette
Rally fades; Priceline falls 17.3%
A stock market rally lost steam Wednesday after mixed earnings from U.S. companies added to fears about Europe’s economic slowdown.
Several big consumer goods companies warned that weak demand in Europe was cutting into their revenue. That followed worrisome economic news from England, France and Germany, where growth had offset recessions in Italy and Greece.
Major U.S. stock indexes closed little changed. The Dow Jones industrial average finished up 7.04 points, or 0.1 percent, at 13,175.64. The Standard & Poor’s 500 index added 0.87 point, or 0.1 percent, to 1,402.22. The Nasdaq closed down 4.61 points, or 0.2 percent, at 3,011.25.
Rising and falling stocks were roughly even on the New York Stock Exchange, where consolidated volume was a lighter-than-average 3.2 billion shares.
The Dow had risen 290 points over the previous three trading days. On Tuesday, the S&P 500 passed 1,400 and the Nasdaq composite closed above 3,000, both for the first time since early May.
As stocks in New York traded tentatively, the dollar rose against the euro, a sign that investors are becoming more fearful.
“It’s not unusual for the market to pull back a bit after a strong move, absorb the latest earnings news and look to see the next catalyst to move higher,” said Quincy Krosby, market strategist with Prudential Financial.
The market is being held back in part by reports from consumer-goods companies that weak sales in Europe are hurting revenue, Krosby said. Consumer discretionary stocks fell the most among the 10 industry groups in the S&P 500.
McDonald’s fell $1.48 to $87.53 after the company said a key revenue figure came in flat in July as the weakening global economy took a toll on customers of the world’s biggest burger chain. McDonald’s was the weakest stock in the Dow.
Priceline. com fell more than $100 after warning investors late Tuesday that its third- quarter revenue and income would come in far below analysts’ forecasts because of the deepening malaise in Europe. Priceline’s stock sank $117.48, or 17.3 percent, to $562.32.
“It’s no longer a theoretical argument that Europe is hampering earnings for American companies,” Krosby said. “It’s a reality, and you’re seeing that today.”
Earlier Wednesday, the Bank of England said it expects the country’s economy to stagnate this year. Only three months earlier, in its previous quarterly inflation report, the Bank of England had forecast annual growth of 0.8 percent.
Separately, the French central bank said it expects France’s economy to contract in the third quarter, the second pullback in a row.
Standard & Poor’s lowered its outlook on Greece’s long-term credit rating, saying the bailed-out nation will likely need more aid from its international lenders as its economy crumbles and leaders delay imposing harsh austerity measures.
And in Germany, industrial output and exports dropped sharply in June, a sign that Europe’s strongest economy might finally be succumbing to the regional crisis.