U.S. Stocks Fall as Merck’s Drop Outweighs Technology’s Gain

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[b]This is a long one[/b]

[quote] Aug. 28 (Bloomberg) -- U.S. stocks fell as investors sold companies whose profits are least tied to the economy after Dell Inc. and Intel Corp. bolstered confidence that the outlook for technology spending is improving. The dollar and oil advanced.

Merck & Co., McDonald’s Corp. and AT&T Inc. fell as drugmakers, sellers of consumer goods, and phone companies posted the steepest drops in the Standard & Poor’s 500 Index. Dell, the second-biggest computer maker, gained 1.8 percent after beating analysts’ profit estimates. Intel, the largest chipmaker, added 4 percent following its increased forecast.

The S&P 500 lost 0.2 percent to 1,028.93 at 4 p.m. in New York, trimming its second straight weekly gain to 0.3 percent. The Dow Jones Industrial Average fell 36.43 points, or 0.4 percent, to 9,544.20 in its first drop since Aug. 17. The Dollar Index added 0.4 percent, while crude oil for October delivery added 0.3 percent to $72.74 a barrel.

“People are perhaps considering shifting from playing defense to playing offense,” said Lawrence Creatura, a money manager at Federated Clover Investment Advisors, which oversees $2 billion in Rochester, New York. “The offensive playbook says sell staples, sell safety, sell large-caps generically.”

Makers of telephone equipment and drugs and suppliers of household goods failed to keep pace with the S&P 500 as it rebounded from a 12-year low on March 9, according to data compiled by Bloomberg. They also trailed the benchmark gauge for U.S. equities as it doubled between 2002 and 2007, with so- called consumer-staples providers climbing 40 percent and drugmakers increasing by 41 percent.

Asthma, Allergies

Merck, maker of the asthma and allergy treatment Singulair, fell 1.7 percent to $32.32, leading health-care companies to the biggest decline among the 10 industries in the S&P 500. Bristol- Myers Squibb Co., the maker of anti-clotting drug Plavix, slid 2.9 percent to $22.12 after Morgan Stanley lowered its rating to “equal-weight,” saying the shares aren’t cheap.

McDonald’s, the world’s largest restaurant company, fell 1 percent to $56.07. AT&T, the biggest U.S. phone company, dropped 0.8 percent to $26.21.

“What’s doing poorly is what I’d consider defensive-type names,” said Nick Kalivas, a market analyst at MF Global Ltd. in Chicago.

Novell Inc. fell the most in the S&P 500, losing 7 percent to $4.38. The maker of Linux operating-system software posted adjusted quarterly profit of 7 cents a share, missing the average analyst estimates by 4.1 percent, according to data compiled by Bloomberg.

Largest Advance

Intel rose 4 percent to $20.25, the biggest gain in the Dow average, and had the biggest positive influence on the S&P 500. Third-quarter sales will be at least $8.8 billion, Intel said in a statement today. That compares with at least $8.1 billion the company projected last month. The company also increased its gross-margin forecast for the period.

Dell, the second-biggest maker of personal computers, climbed 1.8 percent to a 10-month high of $15.93. Dell reported second-quarter profit excluding some item of 28 cents a share on $12.76 billion of revenue. The average analyst estimates in a Bloomberg survey were profit of 22 cents a share on $12.59 billion of sales. Its gross margin also beat estimates.

Tiffany & Co. and J.Crew Group Inc. also beat analyst estimates for profit and sales. Tiffany, the world’s second- largest luxury jeweler, rose 11 percent to $37.57 for the second-biggest advance in the S&P 500. J.Crew Group, the clothing retailer, advanced 6 percent to $34.73.

‘Showing Improvement’

“You have companies truly showing improvement, not just earnings getting better because of cost-cutting, but showing top-line revenue growth,” said Michael Mullaney, a money manager at Fiduciary Trust Co. in Boston, which manages $9 billion.

More than 72 percent of S&P 500 companies beat the average analyst estimate for second-quarter earnings, matching the highest proportion since Bloomberg began tracking the data in 1993.

Led by financial companies, the S&P 500 rose to its highest level since Oct. 6 yesterday, extending its rebound since March 9 to 52 percent.

“Even in economies overcoming credit booms, rallies can be powerful and last much longer than you think,” Bank of America Corp. analysts Sadiq Currimbhoy, Arik Reiss and Jacky Tang wrote in an Aug. 26 report. U.S. stocks are behaving like Japanese equities in the 1990s, meaning the S&P 500 may return 40 percent in the next year, they wrote.

Rally in Europe

European stocks rose today, extending the Dow Jones Stoxx 600 Index’s second straight weekly gain to 1.1 percent. L’Oreal SA, the biggest cosmetics maker, gained after beating estimates, and BHP Billiton Ltd., the world’s biggest mining company, climbed as the price of copper reached an 11-month high.

The MSCI Asia Pacific Index rose 0.8 percent on better- than-estimated earnings at Harvey Norman Holdings Ltd., Australia’s biggest electronics retailer, and brokerage upgrades of Acer Inc., the world’s third-largest computer maker.

Emerging markets will lead global stocks higher, said Barton Biggs, who runs the New York-based hedge fund Traxis Partners. Chinese shares traded in Hong Kong are cheap compared with earnings, he said.

“Globally, estimate revisions are turning positive, which means actually earnings will come in higher than the estimates currently are,” said Noman Ali, who helps manage $20 billion at MFC Global Investment Management in Toronto. [/quote]

[McSanchez]

A regular day on the stock market?

[Levithan II]

Just crash already and get it over with.