Wall Street 1s Lower Ahead of Earnings Reports

By REUTERS July 8, 2014

Wall Street stocks were lower on Tuesday as investors continued to hold off from making big bets going into the start of corporate earnings season.

By midday the Dow Jones industrial average was down 0.76 percent and the Standard & Poor's 500-stock index had lost 0.77 percent. The Nasdaq composite index dropped 1.63 percent

The day's losses were broad, with eight of the 10 primary S.&P. 500 sectors down. The only one to rise solidly was utilities, a defensive group, which added 0.4 percent. About 60 percent of stocks traded on the New York Stock Exchange fell while almost three-fourths of Nasdaq-listed names fell.

In a cautious sign about consumers, Bill Simon, the chief executive officer of Walmart's United States division, told Reuters that while the domestic job market was getting better, the improvement was not giving consumers enough confidence to stimulate their spending.

Alcoa, among the first high-profile names to report, will release its results after the market closes on Tuesday. The aluminum maker is seen posting profit growth of more than 50 percent, according to Thomson Reuters data, along with a 3.6 percent decline in revenue. The stock was down 0.61 percent at midday.

Recent economic data has been strong, following a dismal start to the year, and market participants are looking to corporate earnings for confirmation that the economy snapped back in the second quarter. Many analysts are especially looking for an acceleration in revenue growth.

"The bar has been raised and expectations for earnings are higher than they were last quarter," said Randy Frederick, managing director of active trading at Charles Schwab in Austin. "If they don't come in as expected, stocks could pull back,"

Profits for S.&P. 500 companies are forecast to grow 6.2 percent in the second quarter, according to Thomson Reuters data, down from the 8.4 percent growth forecast at the start of April. Revenue is expected to be up 3 percent.

Wells Fargo is among the few S.&P. 500 companies scheduled to report this week, but next week will see dozens of bellwether names report, including numerous Dow components.

Wall Street had its biggest one-day drop in two weeks on Monday, falling on light volume as investors took profits ahead of the start of earnings. Still, the market's uptrend is viewed as intact, and the Dow held above the psychologically important 17,000 level.

Small-cap stocks underperformed, dropping for a second straight day. The Russell 2000 fell 1 percent for its biggest two-day drop since April.

Airline stocks were among the weakest of the day. Delta Air Lines fell 3.9 percent, followed by Southwest Airlines, down 3.5 percent. Overseas, Air France-KLM gave a full-year profit warning, citing weak prices and overcapacity.

NeuroMetrix shares leapt more than 34 percent after the Food and Drug Administration cleared the company's wearable technology for over-the-counter use in the treatment of chronic pain.

Shares of Groupon were down 2.79 percent after B. Riley upgraded the stock to "buy" from "neutral."

PetSmart was in focus a day after Longview Asset Management became the latest shareholder calling for the board to consider selling the company, even as the retailer said it was reviewing potential changes in its capital structure. Shares were down 0.83 percent by midday.

European equity indexes fell for a third consecutive day after reports that Germany's largest lenders were negotiating a settlement with American authorities over their dealings with countries blacklisted by Washington. The talks follow a huge fine for the French lender BNP Paribas.

The European Central Bank has made unprecedented policy moves in recent months to stimulate bank lending and revive the euro zone economy. But late on Monday, a central bank executive board member, Sabine Lautenschlaeger, showed the strength of opposition in some quarters to a program of asset purchases, which she said should be a last resort.

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