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Technology > Marketing Technology

Stocks slide amid global selloff as Exxon, Micron tumble

By Lu Wang and Jacob Barach

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(Bloomberg) — U.S. stocks joined a global selloff, sending the Standard & Poor’s 500 Index toward its first monthly drop since January, as Exxon Mobil Corp. to Micron Technology Inc. tumbled amid weaker corporate results.

Exxon and Murphy Oil Corp. dropped amid concern over output, driving energy companies to the biggest decline among 10 industries in the S&P 500. Micron slid 7.6 percent after earnings from Samsung Electronics Co., the world’s biggest smartphone maker, trailed estimates.

Whole Foods Group Inc. dropped 3.4 percent after lowering its 2014 revenue forecast. Kraft Foods Group Inc. declined 4.3 percent after reporting quarterly results that missed estimates.

The S&P 500 slid 1.3 percent to 1,944.22 at 11:15 a.m. in New York, dropping below its average price over the past 50 days. The Dow Jones Industrial Average declined 184.57 points, or 1.1 percent, to 16,695.79. Trading in S&P 500 stocks was 20 percent above the 30-day average at this time of day.

“The Fed is stepping out of the way and the market’s valuation is high enough that people are quick to take profit,” Wayne Wilbanks, who oversees $2.5 billion as chief investment officer at Wilbanks, Smith & Thomas Asset Management LLC in Norfolk, Virginia, said in a phone interview. “You are going to get more days like today, where investors are more trigger happy, quicker to liquidate. Everybody knows a correction is coming and it will come.”

The S&P 500 had climbed 0.5 percent in July through yesterday, heading for a sixth straight monthly gain, as companies from Facebook Inc. to Chipotle Mexican Grill Inc. reported a surge in profit, while Time Warner Inc. rallied as Rupert Murdoch’s 21st Century Fox Inc. made a takeover offer. The gauge closed little changed yesterday as weaker earnings and the Federal Reserve’s decision to keep trimming asset purchases offset better-than-forecast economic growth.

Global Earnings

Fifty S&P 500 companies report quarterly earnings today. About 75 percent of those that have released results this season have topped analysts’ estimates for profit, while 66 percent have exceeded sales projections.

Global equities fell amid weaker-than-projected earnings from Europe and Asia. Samsung’s results pushed technology stocks lower, while Deutsche Lufthansa SA joined Adidas AG among European companies that slid following market updates. Banco Espirito Santo SA plunged by the most on record and the bonds slumped after the Portuguese lender was ordered to raise capital following a 3.6 billion-euro ($4.8 billion) first-half net loss.

Market Anxiety

“Maybe the market is getting a little bit tired here,” David Chalupnik, the head of equities at Nuveen Asset Management in Minneapolis, said by phone. His firm runs about $120 billion. “It’s more concern around Europe. We’ve had an extremely easy monetary environment for the past six years. When that changes, it’s going to cause a lot of anxiety.”

U.S. gross domestic product expanded at a 4 percent annual pace in the second quarter, confirming the central bank’s view that a first-quarter contraction was transitory. The Fed yesterday cut its monthly bond buying to $25 billion in its sixth consecutive $10 billion reduction.

The Fed’s Open Market Committee reiterated that it’s likely to reduce bond buying in “further measured steps” and to keep interest rates low for a “considerable time” after ending purchases. The central bank said slack in the labor market persists even though the economy is picking up.

Labor Market

Fewer Americans filed applications for unemployment insurance benefits over the past month than at any time in more than eight years, signaling employers are hanging on to workers as demand improves. The four-week average of jobless claims, considered a less volatile measure than the weekly figure, dropped to 297,250, the lowest since April 2006, from 300,750 the prior week.

Data from Washington tomorrow may show companies added 231,000 jobs this month, according to the median economist estimate. A private report from ADP Research Institute yesterday said U.S. companies boosted payrolls by 218,000 in July, falling shy of the estimates of 230,000.

Argentina missed a deadline yesterday to pay $539 million in interest after two full days of negotiations in New York failed to produce an accord with creditors from its last default in 2001. A U.S. judge ruled that the payment couldn’t be made unless those investors, a group of hedge funds led by Elliott Management Corp., got the $1.5 billion they claimed. Standard & Poor’s said Argentina is in default. Domino Chain

“When events like this happen, investors try to figure out whether this is an isolated occurrence or the first domino in a chain,” Lawrence Creatura, who helps oversee $350 billion as a fund manager at Pittsburgh-based Federated Investors Inc., said in a phone interview. “In the early moments there is always a bit of uncertainty as to which we have on our hands.”

The Chicago Board Options Exchange Volatility Index, known as the VIX, surged 16 percent to 15.47. All 10 S&P 500 main industries declined as energy and technology companies fell at least 1.4 percent.

Exxon declined 2.2 percent. Oil and gas output dropped 5.7 percent to the equivalent of 3.84 million barrels of crude a day, the lowest since the third quarter of 2009, according to data compiled by Bloomberg. Exxon had been expected to post daily output equivalent to 3.96 million barrels, based on the average of six analysts’ estimates.

Murphy Oil dropped 4.7 percent. The oil and natural gas company lowered its full-year production forecast as second- quarter earnings trailed analysts’ estimates.

Micron Technology, the largest U.S. maker of memory chips, slumped 7.6 percent. Samsung sank 3.7 percent in Seoul as it posted the lowest quarterly profit since it became the largest mobile-phone producer in 2012.

Whole Foods

Whole Foods dropped 3.4 percent. The largest U.S. natural- goods grocer said sales will climb 9.6 percent to 9.9 percent this fiscal year, less than the previous forecast for a gain of as much as 11 percent. The company cited increased competition from new competitors.

Kraft lost 4.3 percent after reporting second-quarter sales of $4.75 billion, missing the average analyst projection of $4.83 billion.

Yum! Brands Inc. slid 5.4 percent. The owner of Pizza Hut and KFC said it cut ties with meat supplier OSI Group LLC globally after previously saying it would stop using it China, Australia and the U.S.

–With assistance from Anna Hirtenstein in London.

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