A trader works on the floor at the New York Stock Exchange in New York, Friday, Dec. 28, 2012. Stocks were heading lower Friday, for a fifth day, on concern that Washington lawmakers will fail to reach a budget deal before a year-end deadline.Seth Wenig/The Associated Press
North American markets were lower at the open, with the Dow Jones industrial average falling back below the 14,000 level, as investors took profits amid growing speculation that stocks have been overbought in the short term. Lingering concerns over the European debt crisis and the upcoming budget negotiations in the U.S. were also keeping traders cautious.
In early trading, the S&P/TSX composite index was down 84 points, or 0.6 per cent, at 12,684. The S&P 500 was down 9 points, or 0.6 per cent, at 1,503. The Dow Jones industrial average was down 104 points, or 0.7 per cent, at 13,905 - in danger of nearly wiping out Friday's 149-point advance. Commodities were also weaker, with New York oil futures down $1.5 at $96.25 (U.S.) per barrel, gold down $7 at $1,663 per ounce, and copper down about 0.4 per cent.
Up until this morning, the S&P 500 had posted gains of 6.1 per cent this year, a remarkable rally that approximately equals what a lot of forecasters were expecting in returns for the entire year. A number of technical indicators suggest U.S. markets, at more than five-year highs, are vulnerable to a pullback - especially given that the economic backdrop globally is still on the sluggish side. That was highlighted last week by the contraction in fourth-quarter U.S. GDP.
Corporate earnings have been helping fuel the rally. So far, about 70 per cent of companies have beat analysts' expectations on profit and - in a big pick up from the third quarter - about 67 per cent have surpassed sales projections. Guidance released for the first quarter of this year, however, suggests only modest growth in profits for the start of 2013.
Today's one important piece of U.S. economic data - factory orders for December - didn't do much to boost spirits. Orders rose 1.8 per cent, but economists had expected a 2.3 per cent increase, and demand for core capital goods - a category considered a proxy for business investment plans - dropped 0.3 per cent.
Selling in European equities picked up steam as the day progressed, with London's FTSE 100 now down just over 1 per cent, Germany's DAX down 1.4 per cent and France's CAC 40 down about 1.5 per cent. Bond yields in Spain edged up today as Prime Minister Mariano Rajoy found himself in the middle of a potential corruption scandal, denying allegations over the weekend that he and some members of his political party had accepted secret payouts. Market players were also worried about how a general election will play out later this month in Italy. There are concerns the next government could ease back on the economic reforms implemented by Prime Minister Mario Monti.
Here is a look at some key stocks on the move this morning:
Herbalife Ltd. shares opened down 10 per cent after the New York Post today reported that the Federal Trade Commission may be conducting a probe into the operations of the company, which has been heavily sold short by hedge fund manager Bill Ackman.
Dell Inc. shares are down 1 per cent amid reports that talks continued over the weekend that could end up taking the computer marker private.
Research In Motion Ltd. shares are up about 6 per cent. Today is the first day its ticker will be BBRY in the U.S. and BB in Toronto. Bernstein upgraded the stock today to "outperform" from "market perform" and raised its price target to $22 from $12. There are also reports that suggest its BlackBerry 10 sales are off to a strong start in the U.K.
Canadian Pacific Railway Ltd. has named Keith Creel, an executive from rival Canadian National Railway Co., as president and chief operating officer. Both railways are down nearly 1 per cent in early trading.
Royal Caribbean Cruises Ltd. swung to a fourth-quarter loss as it recorded a massive impairment charge, although net yields, which measure revenue per available cruise day, beat expectations. Shares opened up 0.08 per cent.
Gannett Co Inc. reported a rise in fourth-quarter revenue on strong ad sales at its television stations and as subscribers paid more for its newspapers. But shares opened down nearly 6 per cent even though profit beat estimates.
Oracle Corp. agreed to buy Acme Packet Inc, which makes network equipment to speed up voice, video and data delivery across networks, for about $2-billion (U.S.). Oracle shares opened down about 1 per cent; Acme Packet shares were up 22 per cent to match the offering price.
Darcy Keith