U.S. stocks fell for a second day amid wrangling between lawmakers over plans to raise the federal debt limit and outlooks from 3M Co. and United Parcel Service Inc. that disappointed investors.
3M lost 4.1 percent, the most in the Dow Jones Industrial Average, after projecting full-year earnings that trailed analysts’ estimates. UPS, the world’s largest package-delivery company, dropped 5.3 percent after saying the third quarter will be “fairly slow.” Industrial shares led losses among seven of the 10 main groups in the Standard & Poor’s 500 Index.
The S&P 500 dropped 0.2 percent to 1,334.69 at 10:55 a.m. in New York. The Dow Jones Industrial Average lost 68.04 points, or 0.5 percent, to 12,524.76. The S&P 500 fell 0.6 percent yesterday as Republicans and Democrats failed to find common ground over an agreement to raise the federal debt limit.
“We have multiple sources of uncertainty, including what’s happening in Washington with the debt ceiling,” Mark Freeman, co-chief investment officer at Westwood Management Corp. in Dallas, said in a telephone interview. His firm oversees $14 billion. “The longer the uncertainty goes on, the greater the risk is that it will negatively affect businesses.”
Republicans and Democrats are sparring over separate plans to raise the federal debt limit and avoid a government default. President Barack Obama, in an address last night from the White House, said he remains confident that the stalemate over raising the debt ceiling can be resolved if both sides compromise.
The U.S. Treasury Department may still have enough cash to pay the government’s bills for days or even weeks if Congress fails to increase the debt limit before the Aug. 2 deadline, say analysts at UBS AG and Barclays Plc. Both S&P and Moody’s Investors Service are weighing a downgrade of the U.S. credit rating.
The S&P 500 rallied last week, erasing 81 percent of its loss since April 29 as Europe pledged support for Greece to end the region’s debt crisis and corporate profits topped analysts’ estimates. Since July 11, about 80 percent of S&P 500 companies that have released quarterly results beat projections, according to data compiled by Bloomberg.
Stocks maintained losses after a report showed sales of new U.S. homes unexpectedly declined for a second month in June, indicating housing is still languishing two years into the economic recovery. Purchases dropped 1 percent to a 312,000 annual pace, a three-month low, figures from the Commerce Department showed today in Washington. The median estimate in a Bloomberg News survey of economists called for a 320,000 rate.
A separate report today from S&P/Case-Shiller showed home prices in 20 metropolitan areas declined 4.5 percent in May from the same month last year. The year-over-year decrease was the biggest since November 2009. Other data showed confidence among U.S. consumers unexpectedly rose in July from an eight-month low, led by a rebound in the outlook for jobs over the next six months. The Conference Board’s index climbed to 59.5 from a revised 57.6 reading in June.
3M lost 4.1 percent to $91.13 after the maker of Post-It Notes projected 2011 earnings that fell short of analysts estimates after lower demand for LCD televisions curbed sales in its display and graphics business, the company’s third-biggest unit.
UPS, a bellwether of the economy that handles goods ranging from financial documents to pharmaceuticals and industrial parts, tumbled 5.3 percent to $70.12 after saying in a conference call that the third quarter will be “fairly slow” before demand picks up in the last three months of 2011.
Netflix Inc. tumbled 10 percent to $253.51 after its third- quarter sales and profit forecast missed estimates and the company said a price increase was crimping new-user signups.
Supervalu Inc. gained 9.6 percent to $9.34 as the supermarket chain reported first-quarter earnings of 35 cents a share, beating the average analyst estimate in a Bloomberg survey of 33 cents.
RadioShack Corp. surged 20 percent to $15.75 as the consumer-electronics retailer said it will provide Verizon Wireless products in its stores starting Sept. 15 and it was “comfortable with the range of analysts’ earnings estimates for the remainder of 2011.”
Baidu Inc., the owner of China’s most popular Internet search engine, climbed 4.9 percent to $164.28. The company said third-quarter sales will be at least $611.1 million, compared with the average analyst forecast for $568.4 million, Bloomberg data show.
Broadcom Corp., the supplier of communications chips for Apple Inc.’s mobile devices, rallied 10 percent to $38.39 after forecasting third-quarter sales that topped analysts’ predictions on booming demand for iPhones and iPads.