U.S. Stocks Lower on Weak Spending; Hyatt, Tenet Healthcare,Toyota Up

Devan Biswas
02 Aug, 2011
New York City

U.S. stocks fell after personal income rose at the slowest pace since November and spending declined in June. Investors also worried that the latest debt deal will cloud the economic outlook. Pfizer fell after it missed earnings views and Hyatt Hotels, Toyota Motor and Tenet Healthcare rose.

[R]10:30 AM New York – U.S. stocks turned lower after personal income rose at the slowest pace since November and spending declined in June. Investors also worried that the latest deal will cloud the economic outlook for the next three years. Pfizer fell after it missed earnings views and Hyatt Hotels, Toyota Motor and Tenet Healthcare rose on earnings.[/R]

U.S. indexes declined in early trading as the state of the economic regained investors focus. The U.S. House passed the debt ceiling frame work by a 269-161 vote and the Senate is expected to vote on the agreement later today.

However, the mood in early trading soured after the consumer spending declined in June, first fall in the last two years and income rose at the slowest pace since November. The debt stress in the euro-zone also contributed to the market jitters.

June personal income rose 0.1% and disposable personal income increased 0.1%. Personal consumption expenditure fell 0.2% in the month.

In May personal income fell 0.2%, DPI increased 0.2% and PCE increased 0.1% on revised estimate.

Across the Europe, investors sought the safety of the German bonds and the yields on the German bunds declined 4 basis points to 2.41% and UK gilts declined to 2.77%.

In Paris CAC-40 Index gained 26.93 to 0.8% to 3,560.46 and in Frankfurt DAX Index edged lower 62.92 or 0.9% to 6,891.06. Earlier after the opening the index dropped sharply and the DAX index fell near 2%.

The benchmark indexes in Milan dropped 1.5%, in Stockholm fell 1.7% and in Switzerland 3.2%.

The bond market was in the focus as the investors demanded higher yields from the peripheral euro-zone demanded higher yields.

Spanish 10-year bond yields soared 18 points to 6.38% and Italian bonds gained 21 points to a record high to 6.21%.

Earnings Review

In the earnings news, Archer Daniels Midland ((ADM)) declined more than 3% after it missed quarterly earnings estimates and Pfizer ((PFE)) fell a fraction after it reported earnings below expectations.

Pfizer ((PFE)) said second quarter net income increased to $2.61 billion from $2.48 billion a year ago quarter and earnings per share increased to 33 cents from 31 cents in the period.

Revenues declined 1% to $16.98 billion and sales in emerging markets increased 7%. Sales in primary care drugs division increased that includes the sale of Viagara, Lipitor and pain reliever Celebrex declined 1% to $5.87 billion.

Pfizer left its annual earnings per share forecast between $2.16 and $2.26 and revenues between $65.2 billion and $67.2 billion.

Tenet Healthcare ((THC)) gained nearly 3% after higher patient counts lifted earnings more than expected. Third largest hospital chain operator said patient admissions increased 1 and surgeries rose 1.1%.

Second quarter net income increased to $55 million or 11 cents a share compared to $25 million or 5 cents a share a year ago. Net operating revenues increased 3.1% to $2.37 billion.

Hyatt Hotels ((H)) added 3% after the hotel operator reported stronger than expected earnings. Second quarter earnings increased 48%.

Toyota Motor ((TM)) reported June quarter earnings of 1.1 billion yen compared to 190.4 billion yen a year ago.

The global automaker also lifted earnings outlook for the year to 390 billion yen or $5 billion in the current fiscal year.

The company revised its production plan to a decline of 150,000 units in its global production from the previous estimate of the decline of 450,000. The company now estimates the global production of 7.72 million units compared to the previous forecast of 7.39 billion.

MetroPCS Communications Inc ((PCS)) plunged 25% after it reported second quarter profit of 24 cents a share, lower than analysts’ expectations between 14 and 17 cents a share.

McGraw-Hills Cos ((MHP)) added 5% on the hopes that the company may speed up its plan to separate its ratings and financial data business after activist investor took a stake in the company.