Published October 23, 2012
NEW YORK – U.S. stocks were set for a sharply lower open on Tuesday as earnings from a host of large multinational companies and a Moddy's credit rating downgrade of several regions in Spain triggered concerns about the slowing global economy.
United Technologies Corp reported a 3.3 percent decline in third-quarter earnings and cut its sales forecast for the year, citing weak demand from airlines and an uncertain economy.
Fellow Dow Jones Industrial Average component DuPont reported a lower-than-expected quarterly profit on Tuesday and announced 1,500 job cuts as part of a cost savings program designed to offset falling sales around the world. Its shares tumbled 7.1 percent to $46.25 in premarket trade.
3M Co lost 2.4 percent to $90.33 in premarket trade after the diversified U.S. manufacturer reported a 6.7 percent rise in third-quarter profit, but the company cut its profit forecast for the full year as acquisition costs and a strengthening dollar hurt margins.
"The writing has been on the wall for a while, it's a very tough environment, it's tough to generate new revenues so it shouldn't be too big a surprise we are having people miss on that front," said Peter Jankovskis, co-chief investment officer at OakBrook Investments LLC in Lisle, Illinois.
Adding to the global economic concerns was a fall in Spanish bond prices after Moody's downgraded five of the country's regions including economically important but deeply indebted Catalonia.
"We had gone through a period starting with (European Central Bank President) Draghi's announcement from the ECB that he would stand behind the sovereign debt where Spain situation had kind of faded from people's view and it's bubbling up again," Jankovskis said.
S&P 500 futures fell 16.6 points and were well below fair value, a formula that evaluates pricing by taking into account interest rates, dividends and time to expiration on the contract. Dow Jones industrial average futures dropped 142 points, and Nasdaq 100 futures declined 29 points.
United Parcel Service Inc reported a lower quarterly profit on Tuesday, citing slowing global trade, and said there was "some uncertainty" about the strength of the coming holiday season. Its shares, however, advanced 1.5 percent to $72.64 in premarket.
According to Thomson Reuters data, 33 S&P 500 companies are scheduled to post earnings on Tuesday. Of the 123 S&P 500 companies that have reported earnings through Monday morning, 60.2 percent have topped analysts' expectations, shy of the 62 percent average since 1994 and below the 67 percent average over the past four quarters.
Overall earnings for S&P500 stock index companies are expected to fall 2.4 percent in the third quarter from a year ago. Even more disconcerting to investors, top-line expectations have been more discouraging, with 61 percent of companies having missed revenue expectations.
Apple Inc shed 0.7 percent to $629.50 in premarket trade. The company is expected to make its biggest product move on Tuesday since the iPad's debut two years ago, launching a smaller, cheaper tablet into a market staked out by Amazon.com Inc and Google Inc .
Whirlpool Corp gained 2.5 percent to $88.50 after reporting a higher-than-expected quarterly profit, helped by price increases and tight cost controls, and the world's largest appliance maker raised its earnings outlook for the year.
RadioShack Corp plunged 14.2 percent to $2.05 in premarket after the consumer electronics chain reported a much wider-than-expected quarterly loss, hurt by weak margins in its smartphone business.
The U.S. Federal Reserve's policy committee is also set to begin the first day of a two-day meeting on interest rate policy on Tuesday. The Federal Open Market Committee is likely to hold off from taking fresh steps at the meeting, opting to review the impact of the significant action it took last month and keep a low profile in its last gathering before the November 6 general election.
(Reporting by Chuck Mikolajczak; Editing by Chizu Nomiyama)