Earnings Anxieties Keep S&P 500 in Check, Oil Halts Rally

Nichole Harper
07 Oct, 2015
New York City

Investor anxieties intensified ahead of U.S. corporate earnings as most analysts kept earnings shortfall in the S&P 500 index between 3% and 6% in the third quarter. Oil rally halted after the latest U.S. government data showed rising inventories.

[R][3:00 PM New York City, New York – Investor anxieties intensified ahead of U.S. corporate earnings as most analysts kept earnings shortfall in the S&P 500 index between 3% and 6% in the third quarter. Oil rally halted after the latest U.S. government data showed rising inventories.[/R]

Stocks in New York struggled and lacked direction as bulls looked for positive dynamic in interest rate outlook and bears focused on the coming earnings season.

Investor worries about the earnings intensified ahead of Alcoa earnings on Thursday and most analysts kept the earnings for the S&P 500 index to decline between 3% and 6%.

The slowdown in China has worried investors as auto makers, mobile phone developers and fast food companies find more soft spot in the second largest economy in the world. Yum Brands was the latest casualty and plunged 18%.

On Wall Street, Tollbooth Strategy Index decreased 27.70 or 0.3% to 10,401.97.

S&P 500 index rose 3.22 or 0.2% to 1,982.82 and the Nasdaq Composite Index added 0.33 to 4,748.72.

In addition, oil rally halted after the latest government data showed a rising inventories, surprising traders after an industry group showed flat inventories report.

Crude oil in New York slid 0.04 cents to $48.49 a barrel and gold fell $2.01 to $1,145.23 an ounce.

U.S. Movers

Monsanto Company ((MON)) rose 30 cents to $87.84 after the agricultural products maker reported revenues in the fourth-quarter ending in August declined 10.3% from a year ago to $2.36 billion.

Net loss in the quarter widened to $495 million or $1.06 per diluted share compared to $156 million or 31 cents from the same quarter last year.

Monsanto estimated earnings per share for the fiscal 2016 in the range of $4.44 to $5.01.

Yum! Brands, Inc ((YUM)) plummeted 18.9% or $15.77 to $67.65 after the quick-service restaurant chain operator reported revenues in the third-quarter ending on September 5 increased 2% from a year ago to $3.43 billion.

The company said in China division same store sales in the quarter rose 2% and in KFC division increased 3%.

Same store sales in Pizza Hut edged up 1% and in Taco Bell jumped 4% while same store sales in Indian unit declined 18%.

Net income in the quarter jumped 4% to $421 million or 95 cents per diluted share compared to $404 million or 89 cents from the same quarter last year.

European Markets

Total production output in August rose 1% from July and jumped 1.9% from a year ago month. Output in mining and quarrying surged 17.7%, manufacturing output fell 0.8% and output in electricity declined 3.1% from a year ago month, Office of the National Statistics said.

In London trading, FTSE 100 index gained 55.24 or 0.9% to 6,379.94 and in Frankfurt the DAX index increased 185.03 or 1.9% to 10,085.46.

In Paris, CAC 40 index jumped 66.58 or 1.4% to 4,727.22.

Anheuser Busch Inbev SA gained 1.7% to €99.69 after the Belgium-based brewing company revised its proposal to the board of U.K.-based SABMiller Plc for £42.15 per share or $63.97 per share in cash from the earlier two proposals of about £40 per share and £38 per share in cash.

The revised proposal represents a premium of approx 44% to SABMiller''s closing price of £29.34 on September 14.

The SABMiller board rejected both prior approaches without any meaningful engagement but now the revised offer values the company as high as £68.24 billion or about $104 billion.

SABMiller said the latest proposal “still very substantially undervalues SABMiller, its unique and unmatched footprint, and its stand-alone prospects.”

Sports Direct International Plc declined 4% to 744.50 pence after the U.K.-based sports and leisure products retailer agreed to acquire full control of Ireland-based clothing retailer Warrnambool owned by Northern Ireland-based homewares retailer Heatons for €47.5 million.

Tesco Plc jumped 2.4% to 196.69 pence after the U.K.-based supermarket chain and retail bank reported group sales in the first-half ending on August 29 dropped 2.3% from a year a go to £27.23 billion.

Net in the period swung to a loss from a year ago to £365 million compared to profit of £6 million and diluted loss per share swung to a 4.47 pence from diluted earnings per share of 0.07 pence.

The company said it is on track to for annual cost savings of £400 million from restructuring.

Asian Markets

Nikkei average in Tokyo advanced for the sixth session in a row and extended longest winning streak in three months.

Investor shifted attention to the next meeting of policymakers at the end of October. Aeon Mall Co said first-half sales rose 14% but net declined nearly 5%.

Nikkei in Tokyo extended gains for the third day in a row and investors focused on the latest earnings reports.

Investors shifted attention to the next Bank of Japan meeting scheduled on October 30 and speculated that the central bank may be ready to offer more easing steps.

At the last meeting, the Bank of Japan left its stimulus plan and reference rate on hold as widely expected. However, jobs market for professionals earnings more than 600,000 yen a month is very tight and wage pressures are building.

The Nikkei 225 Stock Average increased 136.88 or 0.8% to 18,322.98 and the broader Topix index rose 17.33 or 1.2% to 1,493.17.

The yen strengthened to 120.03 against a dollar.

Aeon Mall Co., Ltd gained 0.6% to 1,896 yen after the shopping centres operator reported net sales in the in the first-half ending in August jumped 14.3% from a year ago to 111.71 billion yen.

Net income in the year dropped 4.7% to 9.80 billion yen compared to 10.28 billion yen and diluted earnings per share decreased to 42.97 yen from 45.07 yen.

Aeon forecasted net sales for the year to surge 16.7% to 238 billion yen and net income may slightly up 0.4% to 24.60 billion yen.

Germany and India stepped up business and technology cooperation after the recent visit of Chancellor Merkel brought a delegation of ministers and corporate executives.

Prime Minister Narendra Modi visited Germany to drum up business with German manufacturing companies to locate their manufacturing plants in India.

Currently, 1,500 German companies are operating in India and more than 6,000 are operating in China.

Rupee strengthened 45 paisa to 64.95 against one U.S. dollar.

The Sensex Index gained 102.97 or 0.4% to close at 27,035.85. The CNX Nifty added 24.50 or 0.3% to 8,177.40.

State Bank of India signed a loan agreement with German development bank KfW. HMT jumped after the machine tool maker and Fraunhofer agreed to work together.