Stock prices were volatile Tuesday following comments by Federal Reserve Board Chairman Ben Bernanke and weakness in shares of Hewlett-Packard.
The Dow Jones Industrial Average, down 75 points during the session, finished with a loss of just 7.45 points to 12,788.51. The Nasdaq Composite Index rose 0.61 point to 2,916.68, and the S&P 500 Stock Index inched up 0.92 point to 1,387.81.
Hewlett-Packard (NYSE: HPQ) shares fell $1.59 to $11.71, a 10-year low. The shares fell after the company reported quarterly earnings that included an $8.8 billion loss associated with the purchase of Autonomy, a British software company. Hewlett-Packard is one of the 30 stocks in the Dow Jones Industrial Average.
Oil fell $2.53 to $86.75 a barrel on expectations that a settlement can be reached in the Israel-Gaza conflict in the Middle East. Gold was down $10.80 to $1,723.60 an ounce.
New home construction unexpectedly climbed to a four-year high in October, more evidence of a revival in the industry that’s helping propel the U.S. economy. The euro traded at almost a two-week high against its U.S. counterpart as the region’s finance ministers met in Brussels to discuss ways to plug a 15 billion euro ($19 billion) hole in Greece’s finances.
Stocks briefly extended losses as Bernanke said the central bank doesn’t have the tools to offset the potential harm to the economy from the so-called fiscal cliff.
“Bernanke’s comment was a polite way of telling Congress that they should not kick the can down the road,” said John Manley, who helps oversee about $207.5 billion as chief equity strategist for Wells Fargo Advantage Funds in New York.
HP tumbled 12 percent to $11.71. The company accused Autonomy, the software maker it bought last year, of a broad range of financial falsehoods resulting in an $8.8 billion write-down, adding to the challenges facing Chief Executive Officer Meg Whitman in the midst of a multiyear turnaround.
Hewlett-Packard began investigating Autonomy’s finances after a senior executive at Autonomy came forward after founder Mike Lynch, 47, departed in May, Hewlett-Packard said. Lynch, in an interview with The Wall Street Journal, said Hewlett-Packard has mismanaged the Autonomy deal and that the company is “trying to cover it up with this big write-off.”
Best Buy Co. (NYSE: BBY) sank 13 percent to $11.96 as the largest consumer-electronics retailer reported a $10 million loss on weaker-than-expected sales. Chief Executive Officer Hubert Joly, who took over in September, is increasing employee training to improve customer service and plans to work with vendors on exclusive products as Best Buy customers defect to Amazon.com Inc. (Nasdaq: AMZN) and Wal-Mart Stores Inc. (NYSE: WMT). Same-store sales fell 4.3 percent in the third quarter, more than the 3.3 percent drop estimated by analysts in a Retail Metrics survey. Sales by that measure have slid in nine of the past 10 quarters.
Intel Corp. (Nasdaq: INTC) dropped 3.6 percent to $19.51 after UBS AG (NYSE: UBS) cut its rating for the largest chip-maker. The shares were downgraded to "neutral" from "buy" at the firm, which cited uncertainty around CEO transitions. Paul Otellini will retire in May, in a surprise move three years before mandatory retirement, after failing to equip the company for a shift toward mobile devices and away from the personal computers it long dominated.
Cliffs Natural Resources Inc. (NYSE: CLF) retreated 12 percent to $30.48. The largest U.S. iron-ore producer was downgraded to "sell" at Goldman Sachs Group Inc. (NYSE: GS), which cited the company’s high production costs in weak iron ore markets.
Campbell Soup Co. (NYSE: CPB) slid 2 percent to $36.21. The world’s largest soup maker said earnings this quarter could be “negatively impacted” amid high soup inventories and an increase in marketing spending.
Research In Motion Ltd. (Nasdaq: RIMM) climbed 1.2 percent to $9.71 after Jefferies & Co. raised the stock’s rating to "hold," saying the struggling maker of the BlackBerry may avoid a “worst-case scenario.” The shares pared gains after news that the BlackBerry is being dropped by the U.S. government agency that investigates plane accidents because of the device’s reliability issues.
Archer-Daniels-Midland Co. (NYSE: ADM) added 3.1 percent to $26.34. The world’s biggest corn processor was raised to "outperform" from "market perform" at BMO Capital Markets by equity analyst Kenneth Zaslow. The 12-month share-price estimate is $32.
Groupon Inc. (Nasdaq: GRPN) jumped 8.5 percent to $3.37 after Tiger Global Management LLC, the $8 billion hedge fund run by Chase Coleman and Feroz Dewan, said it acquired a 9.9 percent stake in the daily deal site.
Lower earnings estimates are dragging down stocks from this year’s highs, and their full effect has yet to be felt, according to Hasan Tevfik, a global equity strategist at Citigroup Inc. (NYSE: C). He compares the performance of an earnings-revision index compiled weekly by Citigroup with MSCI Inc.’s (NYSE: MSCI) All-Country World Index since the beginning of last year.
Since the first week of May, the revision index has been less than zero, which means there were more estimate cuts than increases among analysts. The MSCI gauge of stocks in developed and emerging markets rose to its peak for the year in September and then lost as much as 6.7 percent.
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