Stocks Falter on Washington Gridlock and Earnings Caution

Nichole Harper
15 Jan, 2013
New York City

Stocks were under pressure in New York and Washington rhetoric turned traders cautious. General caution and negative sentiment prevailed ahead of the corporate earnings release this week. Lennar reported higher than expected earnings on an increase in new orders.

[R]10:15 AM New York – Stocks were under pressure in New York and Washington rhetoric turned traders cautious. General caution and negative sentiment prevailed ahead of the corporate earnings release this week. Lennar reported higher than expected earnings on an increase in new orders.[/R]

Stocks in New York opened lower as Washington rhetoric notched up and President Obama said he has no plans to negotiate with Republican leaders over raising the debt ceiling.

Separately, Fitch, a ratings agency said it could lower the debt rating of the U.S. if lawmakers do not revise the debt ceiling soon. International investors have so far bought the view that the lawmakers will increase the debt ceiling but the delay could hurt the credibility of the government.

In economic news, retail sales increased 0.5% in December from the revised 0.4% rise in November, according to the data released by the Commerce Department today. November sales were earlier estimated at 0.3% increase.

U.S. producer price index declined 0.2% in December, third monthly declined after adjusting for seasonal factors according to the Labor Department.

Wholesale prices, excluding volatile food and energy costs rose a fraction 0.1% in the last month. Food price drove the most of the decline in the price index.

For the year 2012, wholesale inflation increased 1.3%, the lowest annual rate in six months.

Manufacturing in New York state declined for the sixth month in a row. The index tracked by the New York Fed declined to -7.8 in January from a revised -7.3 reading in the month before.

Stocks in Review

Dell Inc. ((DELL)) gained 2.2% or 28 cents to $12.58 on the media reports that the company is in talks to go private. The company spokesman refused to comment.

Express, Inc. ((EXPR)) increased 1.2% or 17 cents to $14.06 after the specialty retail apparel chain lifted outlook for the fourth quarter and full year 2012.

For the fourth quarter, the company expects comparable sales to range from flat to up 1% and net income in the range of $61 million to $63 million or 72 cents to 74 cents a diluted share from the previous guidance of $53 million to $58 million or 62 cents to 68 cents per diluted share.

Facebook ((FB)) gained 0.7% to $31.81 ahead of news event at the company headquarter that is fueling speculation of new product and alliance announcement releases.

Forest Laboratories, Inc. ((FRX)) decreased 1.3% or 52 cents to $37.59 after the pharmaceutical company reported net revenues in the third quarter dropped 42% to $722.7 million and net loss in the quarter swung to $153.6 million or 58 cents per diluted share compared to net income of $278.4 million or $1.04 a share a year ago period.

The company lowered non-GAAP earnings per share for the fiscal 2013 and expects earnings at the lower end of the previously guided range of 45 cents to 60 cents and total net revenue between $3.1 billion and $3.2 billion.

Lennar Corporation ((LEN)) added 7 cents to $41.02 after the homebuilder reported net sales in the fourth quarter ending in November jumped 42% to $1.35 billion from $952.7 million in the same period of last year. Net income in the quarter surged more than three-fold to $124.3 million or 56 cents per diluted share compared to $30.3 million or 16 cents a share a year ago earlier.

The homebuilder said new orders climbed 32% to 3,983 homes and backlog soared 87% to 4,053 which represent surged 107 to $1.2 billion in dollar terms.

Lululemon Athletica Inc ((LULU)) declined 7.9% or $5.77 to $66.66 after the yoga inspired apparel retailer lifted fourth quarter net revenue guidance in the range of $475 million to $480 million based on comparable store sales percentage increase in the high single digits and diluted earnings per share at 74 cents for the quarter from previous guidance of 71 cents to 73 cents.