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Guidance cuts and lower profits from corporates guided benchmarks mostly lower on Wednesday, ending benchmarks’ four-day rally. However, there were some encouraging corporate results too and they helped restrict losses. Consumer staples stocks were among the biggest losers for the day. For a look at the issues currently facing the markets, make sure to read today’s Ahead of Wall Street article
The Dow Jones Industrial Average (DJI) lost 0.2% to close at 15,963.94. The S&P 500 was down by a meager 0.03% to finish yesterday’s trading session hardly changed at 1,819.26. The tech-laden Nasdaq Composite Index managed to move upwards, though, gaining 0.2% to close at 4,201.29. The fear-gauge CBOE Volatility Index (VIX) dropped 1.5% to settle at 14.30. Total volume on the New York Stock Exchange was 3.33 billion. Advancers edged past the declining stocks on the New York Stock Exchange, as for 55% stocks that moved up, 42% stocks closed in the red.
A guidance cut from The Procter & Gamble Company (NYSE:PG) weighed heavily on the indices. P&G’s shares were down 1.7% yesterday, dragging the Dow lower. The consumer products giant cut fiscal 2014 sales and earnings projections citing the impact from headwinds related to devaluation of currencies in many developing countries. Fiscal 2014 core earnings per share are now expected to increase in the range of 3%–5%, down from prior projection of 5%–7% increase.
The guidance cut factors in currency rate fluctuations in Venezuela and recent currency devaluations by several other developing countries. Revenues are expected to increase just 0%–2%, down from 1%–2% projected earlier. Currency is now expected to hurt revenues by 2%–3%, higher than previous forecast of 2%.
Also affecting the mood was Lorillard, Inc.’s (NYSE:LO) dismal fourth-quarter results. Quarterly earnings of 82 cents a share missed estimates by about 3.5%. Increased costs were said to have negated higher revenues in both traditional and electronic cigarettes segments. Lorillard’s stocks were down almost 5% and featured among the biggest decliners in the S&P 500 index.
As for the S&P industry groups, consumer staples lost the most with Consumer Staples Select Sector SPDR (XLP) declining 0.4%. Stocks from this sector such as The Coca-Cola Company (NYSE:KO), Philip Morris International Inc. (NYSE:PM), CVS Caremark Corporation (NYSE:CVS) and Altria Group Inc (NYSE:MO) dropped 0.3%, 1.3%, 0.3% and 0.6%, respectively.
However, there was some good news on the earnings front as well, which helped restrict losses for the benchmarks. Travel information company TripAdvisor Inc. (NASDAQ:TRIP) jumped 7.2% after reporting encouraging fourth quarter results. The company notched its fifth consecutive quarter of positive earnings surprise and revenues as well, beating expectations. Owens Corning (NYSE:OC) also reported strong fourth-quarter adjusted profits that helped its stocks jump 8.7%.
Benchmarks had to close mostly in the red yesterday after its four-day bullish run. During this period, markets received a boost after unemployment hit a post-recession low and Fed Chairwoman Janet Yellen assured interest rates would continue to be low.
In her first speech before Congress after taking up the top position at the central bank, Yellen also supported the tapering process. Yellen had said: “Let me emphasize that I expect a great deal of continuity in the Federal Open Market Committee’s approach to monetary policy”. The positive tone in these four days, which also included a drop in initial claims and robust quarterly results from The Walt Disney Company (NYSE:DIS), had helped benchmarks record its longest winning streak this year.