Pfizer earning report sends US stocks lower

Market ignores upbeat economic reports

After two consecutive days of rally, US stocks fell on Wednesday, 03 February 2010. Earnings miss from Pfizer weighed on the healthcare sector and the same soured overall market sentiment. The economic data that checked in for the day were upbeat in nature but did little to help stocks to trade higher. Nasdaq was the only index to finish marginally higher with help from technology stocks.

At the end of the day on Wednesday, 03 February 2010, the Dow Jones Industrial Average ended lower by 26.3 points at 10,270.55. Nasdaq ended higher by 0.85 points at 2190.91. S&P 500 ended lower by 6.04 points at 1097.28. Indices had opened marginally higher during the day.

Eight of ten economic sectors ended in the red led by healthcare, financial and materials sectors. Technology and consumer discretionary sectors were the only winners.

Pfizer and Merck were the main Dow laggards today. Mac Donalds was the major Dow winner. Mac Donalds received investment upgradation in its rating from one of the investment firms.

In the latest earning report, the drug giant, Pfizer, said its fourth-quarter profit more than doubled to $767 million, but the result fell short of Wall Street estimates. The company also scaled back 2012 revenue estimates, hurting sentiment around the sector. Fellow drug component Merck also fell considerably.

In other earning area, insurers Aflac and MetLife each exceeded consensus earnings estimates.

Among economic data expected for the day, The Institute for Supply Management reported on Wednesday, 03 February 2010 that the service sector of the US economy moved back into growth territory in January 2010. The ISM nonmanufacturing index rose to 50.5% from 49.8% in December against an expected figure of 51.

Readings above 50% in the diffusion index indicate that activity at more firms is expanding than contracting. The index had been above 50% for two months in the fall but then slipped under that threshold in November and December. Only four industries reported growth, while 11 reported contraction.

A private sector job report also showed that US economy had shed the least number of jobs in January 2010 since the recession hit in 2007.

In the currency market on Wednesday, the dollar index, which weighs the strength of dollar against the basket of six other currencies rose by almost 0.5%.

Crude oil prices ended lower on Wednesday, 03 February 2010. Prices fell as crude inventories rose more than expected. Earlier during the day, upbeat economic reports had pushed crude prices higher. Strong economic reports generally tend to push crude prices higher on anticipation of higher demand in coming months. The strong dollar further pushed crude price lower today.

On Wednesday, crude-oil futures for light sweet crude for March delivery closed at $76.98/barrel (lower by $0.25 or 0.3%). On a year to date basis, crude is still lower by 4.3%.

The Energy Department in US reported on Wednesday, 03 February 2010 crude oil inventories rose by 2.3 million barrels in the week ended 29 January 2010. Market was expecting a decline of 1 million barrels in crude stocks.

In the weekly inventory report, the EIA also said inventories of distillate, which includes heating oil, fell by 948,000 barrels, while gasoline stocks fell by 1.3 million barrels. Market was expecting a buildup of 1.5 million barrels in gasoline stocks. The report also stated that refinery utilization fell to 77.7%, while it was expected to rise 0.25% to 78.75%.

Barring Dr Reddys and VSNL, all Indian ADRs ended higher today. ICICI Bank and Rediff.com were the main winners soaring 3.3% and 2.6% respectively. Dr Reddys and VSNL shed 0.9% and 0.6% respectively.

Tomorrow, there are a couple of economic reports scheduled for the day – the initial and continuing claims followed by the productivity report. Other than that, earning reports will continue to dominate.