Wall Street flat on earnings; IBM pressures Dow

NEW YORK Wed Jan 22, 2014 4:36pm EST

1 of 6. Traders work on the floor of the New York Stock Exchange January 21, 2014.

Credit: Reuters/Brendan McDermid

NEW YORK (Reuters) - The S&P 500 closed flat on Wednesday as a mixed bag of corporate earnings failed to give investors the confidence to push equities higher with the index near record levels.

For the second day in a row, the Dow posted outsized losses following weak results from one of its components while the Nasdaq climbed, with BlackBerry one of its biggest boosts.

International Business Machines Corp (IBM.N) lost 3.3 percent to $182.25, the biggest drag on the Dow after the tech giant missed revenue expectations for a fourth straight quarter amid weakening demand, particularly in growth markets like China.

The results followed disappointments from Verizon (VZ.N), Travelers (TRV.N) and Johnson & Johnson (JNJ.N), which weighed on the blue-chip index on Tuesday.

IBM's decline offset modest gains from fellow component United Technologies Corp (UTX.N), which rose 1 percent to $116.12 after it reported fourth-quarter earnings that topped Wall Street estimates, although revenue was shy of expectations.

"We've seen significant decreases in a company's ability to deliver on earnings this quarter ... however, we've also seen signs that the top-line growth we've been looking for is starting to emerge," said Kristina Hooper, head of portfolio strategies at Allianz Global Investors in New York.

"Seeing a broad-based top-line growth trend would really speak to the health of the economy ... that's allowed for the market to hang in there despite some disappointments."

With 16 percent of the S&P 500 having reported, about 61 percent have topped profit expectations, according to Thomson Reuters data, compared with the average of 67 percent over the past four quarters. More than 66 percent have topped revenue expectations, above the 55 percent average over that timeframe.

About eight companies have issued negative outlooks for every positive one, which would mark the lowest ratio on record should it continue.

After the market closed on Wednesday, Netflix Inc (NFLX.O) reported a rise in fourth-quarter earnings, helped by subscriber growth. Shares surged 17 percent in after-hours trading.

Online auction site eBay Inc (EBAY.O) surged 11 percent to $60.44 after the bell following its results.

The Dow Jones industrial average .DJI was down 41.10 points, or 0.25 percent, at 16,373.34. The Standard & Poor's 500 Index .SPX was up 1.06 points, or 0.06 percent, at 1,844.86. The Nasdaq Composite Index .IXIC was up 17.24 points, or 0.41 percent, at 4,243.00.

After a 29.6 percent jump in 2013, buoyed by the Federal Reserve's massive stimulus, the S&P 500 is down 0.2 percent this year as investors look to corporate profits to justify current prices. The index is 0.2 percent away from its all-time closing high.

"In general, valuations are stretched, though there are still areas of opportunity for investors who are able to be more selective," said Hooper, who helps oversee $436 billion in assets under management. "Focusing on areas with more growth may be worth paying up for."

Also in earnings, Advanced Micro Devices Inc (AMD.N) slumped 12 percent to $3.67 after forecasting a steeper-than-expected fall in current quarter revenue, while Coach Inc (COH.N) tumbled 6 percent to $49.38 as the S&P's worst performer after it said sales in North America fell further in the final quarter of 2013.

On the upside, Norfolk Southern Corp (NSC.N) jumped 4.8 percent to $92.94 after its earnings beat expectations, helping lift the Dow Jones Transportation average .DJT to a record high.

Nuance Communications (NUAN.O) rose 7.8 percent to $16.05 after giving a first-quarter outlook, helping to boost the Nasdaq. U.S.-listed shares of BlackBerry (BBRY.O) also buoyed the tech-heavy index, jumping 8.6 percent to $10.78. Shares of the smartphone maker are up about 26 percent over the past three sessions.

About 62 percent of companies traded on the New York Stock Exchange closed higher while 55 percent of Nasdaq-listed shares ended in positive territory. About 6.23 billion shares traded on all U.S. platforms, according to BATS exchange data.

(Editing by Bernadette Baum and Nick Zieminski)

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Comments (4)
bertanderson wrote:
The Nasdaq is still far away from its year 2000 peak of 5000. It can probably go to 6000. Many Nasdaq companies don’t need low P/E ratios or even need to be making money. Look at Blackberry over the last month. They’ve lost billions and the stock has doubled. I would put my money in the Nasdaq companies (preferably the ones that you can’t evaluate very easily). The Nasdaq is staying buoyed and reaching new highs while all the Bricks and Mortar DOW companies are struggling to show better earnings and higher revenue as the economy slows down a bit or the market decides to come into line with their earnings and revenue. It’s risky in the Nasdaq, but if you have the stomach for it, you can get some short term excellent returns.

Jan 22, 2014 8:46am EST  --  Report as abuse
bertanderson wrote:
It’s good to hear that China and not only the US and Japan are printing money to help the economy. This should really help the Hang Seng.

Jan 22, 2014 8:50am EST  --  Report as abuse
bertanderson wrote:
Most of the really big tech companies on the Nasdaq…Apple, Google, Facebook etc. have some much money in the bank that they can keep the stock market buoyed for as long as they like. The Feds don’t hold a candle to the money these companies have. They can have share buy backs going into 2015 to keep the market up. It will be interesting to see how things shape up.

Jan 22, 2014 9:57am EST  --  Report as abuse
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