Stocks fluctuate amid bank earnings, Portugal debt concern

NEW YORK – U.S. stocks fluctuated, with the Standard & Poor’s 500 Index poised for its worst week since April, as investors weighed the implications of a corporate debt crisis in Portugal and assessed earnings reports.

Wells Fargo & Co. fell 1 percent after reporting per-share earnings that did not rise for the first time in 18 quarters. Fastenal Co. sank 4.6 percent after sales fell short of analysts’ estimates. Gap Inc. declined 1.5 percent after same-store sales in June unexpectedly fell. Lorillard Inc. jumped 3.9 percent after Reynolds American Inc. said it’s in talks to buy the cigarette maker. Amazon.com Inc. and EBay Inc. rose at least 2.3 percent to pace gains among Internet stocks.

The S&P 500 fell less than 0.1 percent to 1,963.22 at 11:37 a.m. in New York. The Dow Jones Industrial Average fell 22.70 points, or 0.1 percent, to 16,892.37. The Nasdaq 100 Index rose 0.3 percent. Trading in S&P 500 stocks was 2.1 percent below the 30-day average at this time of day.

“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.”

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The S&P 500 fell 0.4 percent on Thursday as signs of financial stress among Portuguese banks fueled concern over the strength of the European recovery. The equity gauge has dropped 1 percent this week, heading for its biggest slump in three months.

Equity valuations

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

The S&P 500 trimmed losses of as much as 1 percent on Thursday 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.

More than 140 companies in the S&P 500, including Citigroup Inc., JPMorgan Chase & Co., Goldman Sachs Group Inc. and Johnson & Johnson, will report quarterly results between now and July 23, according to data compiled by Bloomberg.

“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.”

Volatility spike

The Chicago Board Options Exchange Volatility Index fell 1.9 percent Friday to 12.35. The gauge known as the VIX has surged 20 percent this week, poised for the biggest rally since April. It finished last week at a seven-year low.

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.

Wells Fargo

Wells Fargo dropped 1 percent to $51.28. The bank reported quarterly profit of $1.01 per share, in line with estimates. The result ended a 17-quarter streak of rising per-share earnings at the bank.

Five of the 10 main S&P 500 industries retreated on Friday. Enegy producers sank 0.7 percent to pace declines, as crude oil headed for a third weekly decline. Chevron Corp. sank 1.3 percent to $128.61 for the biggest decline in the Dow.

Radian Group Inc. declined 5.3 percent to $13.78 and MGIC Investment Corp. plummeted 11 percent to $8.25. The two companies are among mortgage insurers that would need to fill a financial gap under new financial-strength rules proposed by the Federal Housing Finance Agency.

Genworth Financial Inc., which dropped 3.5 percent to $16.47, said Thursday that it may need as much as $550 million at its mortgage insurer to meet the standards by June 30, 2015.

Gap, Fastenal

Gap dropped 1.5 percent to $40.35. The biggest U.S. apparel-focused retailer said sales at stores open at least a year fell 2 percent in June, compared with a 7 percent gain in the year-earlier period. Retail Metrics Inc., a research firm that tracks the industry, had projected a 0.8 percent gain.

Rent-A-Center Inc. slid 11 percent to $25.75 after saying second-quarter adjusted earnings will be 36 cents to 38 cents a share, missing the average analyst prediction of 48 cents. The operator of rent-to-own electronics and furniture stores cited weaker-than-expected demand.

Fastenal retreated 4.6 percent to $45.93. The provider of industrial and construction supplies reported second-quarter revenue of $949.9 million, missing the average analyst estimate of $952.3 million.

Lorillard gained 3.9 percent to $65.57. The company confirmed the talks with Reynolds, the producer of Camel cigarettes. British American Tobacco Plc, the U.K. company which owns 42 percent of Reynolds, said it expects to support the transaction by subscribing for additional shares to maintain its stake. Reynolds was little changed at $62.16.

Whirpool Corp. increased 1.6 percent to $141.40. The Benton Harbor, Mich.-based company agreed to pay $1 billion for a controlling stake in Italian appliance maker Indesit Co., its largest acquisition since buying former rival Maytag Corp. eight years ago.

EBay rose 2.3 percent and Amazon.com jumped 4.1 percent to pace gains in the Dow Jones Internet Composite Index. The gauge is poised for its first weekly decline since May 9 as investors resumed selling earlier this week in some of the bull market’s biggest winners.

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