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U.S. stocks fluctuate amid bank earnings, Portugal debt concern

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U.S. stocks fluctuated, with the Standard & Poor’s 500 Index poised for its worst week since April, as investors weighed corporate earnings and the implications of a debt crisis at a Portuguese bank.

The S&P 500 added less than 0.1 percent to 1,965.16 at 9:31 a.m. in New York. The Dow Jones Industrial Average gained 1.25 points, or less than 0.1 percent, to 16,961.32.

“People are going to keep one eye on earnings and one eye on peripheral debt,” Chad Morganlander, a money manager at St. Louis-based Stifel, Nicolaus & Co., which oversees about $160 billion, said in a phone interview. “Debt concerns may trump earnings in the short-term, but as long as we have solid numbers for this quarter, markets overall should be fine.”

The S&P 500 fell 0.4 percent yesterday as signs of financial stress among Portuguese banks fueled concern over the strength of the European recovery. The equity gauge has dropped 1.1 percent this week, heading for its biggest slump in three months.

Portugal’s second-largest lender sought to reassure investors today by revealing its exposure to related companies after a missed payment on short-term debt by a member of the Portuguese group.

Equity Valuations

The S&P 500 trimmed losses of as much as 1 percent yesterday amid speculation the day’s initial selloff was overdone. The gauge slipped 1.1 percent in the first two days of the week on concern equities had risen too far, too fast.

The S&P 500 ended last week at an all-time high, and the index has not had a drop of 10 percent in more than two years. The gauge trades at a valuation of 18 times reported earnings, the highest since 2010.

Wells Fargo and Fastenal Co. are among U.S. companies that report quarterly earnings today. Banks including Citigroup Inc., JPMorgan Chase & Co. and Goldman Sachs Group Inc. will announce results next week.

“With the start of earnings season, we’re expecting the U.S. to rebound,” Nick Skiming, who helps manage $10 billion at Ashburton Ltd., said by phone from Jersey, in the Channel Islands. “The U.S. is pretty clearly on the road to recovery. Their GDP, unemployment, and manufacturing figures are all fairly decent. From an economic view, it is the better place to put your money, a natural safe haven.”

Profit at S&P 500 companies probably rose 5 percent in the three months through June, while sales gained 3 percent, analyst estimates compiled by Bloomberg show. The projections have decreased from the start of April, when analysts predicted a 7.3 percent jump in earnings and a 3.7 percent sales increase.

Earnings for banks are forecast to fall 3.3 percent in the second quarter, according to data compiled by Bloomberg. It’s the only sector expected to see declining profits, the data show.

–With assistance from Anna Hirtenstein and Namitha Jagadeesh in London.


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