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U.S. Stocks Halt Three-Day Rally as Google, IBM Sales Disappoint

April 17 (Bloomberg) -- U.S. stocks declined, after the best three-day rally in two months, as disappointing sales from Google Inc. and IBM overshadowed earnings from Morgan Stanley and General Electric Co.

Google slid 3.3 percent as rising costs and a shift of advertising to mobile phones curbed results. International Business Machines Corp. dropped 3.9 percent after reporting sales that trailed projections. UnitedHealth Group Inc. sank 5.6 percent after profit fell on cuts to its Medicare Advantage program. Morgan Stanley added 4 percent as a gain in trading revenue helped profit top estimates. General Electric Co. gained 1.9 percent after results beat forecasts.

The Standard & Poor’s 500 Index fell 0.3 percent to 1,857.44 at 9:56 a.m. in New York. The Dow Jones Industrial Average lost 56.29 points, or 0.3 percent, to 16,368.56 today. The U.S. equity markets are closed tomorrow for a holiday.

“It’s all about earnings this time of the year,” Lawrence Creatura, a Rochester, New York-based fund manager at Federated Investors Inc., which oversees $376 billion, said in a telephone interview. “We’ve come through that quiet period that proceeds earnings, where the macro data takes the stage. Today company specific news will dominate.”

The S&P 500 rose yesterday, capping a three-day gain of 2.6 percent and erasing its loss for the year, as Yahoo! Inc. earnings topped estimates and industrial production climbed more than forecast. The gauge sank 2.7 percent last week, the most since 2012.

Earnings Estimates

Twenty-five companies in the S&P 500 report earnings today. Profit per share for the index’s constituents probably dropped 0.9 percent in the first quarter, according to analyst estimates compiled by Bloomberg. Revenue climbed 2.6 percent from a year earlier, the projections show.

Fewer Americans than forecast filed applications for unemployment benefits last week, a sign the labor market continues to strengthen. Jobless claims increased by 2,000 to 304,000 in the week ended April 12 from a revised 302,000 the prior period that was the lowest since September 2007, a Labor Department report showed.

Investors are also watching developments in eastern Ukraine. Diplomats from the U.S., European Union, Ukraine and Russia met in Geneva today to discuss the crisis. The U.S. and European leaders accuse Russian President Vladimir Putin of stoking unrest and have threatened to extend sanctions.

Industry Returns

Seven of 10 S&P 500 industries gained as industrial companies rose 0.4 percent for the best performance. Technology stocks fell the most, sliding 0.5 percent.

Google’s Class C shares dropped 3.3 percent to $538.14. The owner of the largest search engine said revenue, excluding sales passed on to partners, totaled $12.2 billion in the first quarter. That missed a projection by analysts for $12.3 billion.

IBM dropped 3.9 percent to $188.73. The company said first- quarter revenue fell 3.9 percent from a year earlier to $22.5 billion. That missed the average estimate of analysts that called for $22.9 billion.

UnitedHealth sank 5.6 percent to $73.79 for the worst drop in the Dow. The biggest U.S. health insurer said first-quarter profit fell 7.8 percent. It has derived growth from Medicare and has the biggest program among publicly traded insurers, with 3 million enrollees. In April, the government implemented a second round of cuts to Medicare Advantage.

Morgan Stanley added 4 percent to $31.09. First-quarter net income rose to 74 cents a share from 48 cents a year earlier, the bank said. Excluding an accounting gain tied to the firm’s own debt, profit from continuing operations was 68 cents a share, topping the 60-cent average estimate of analysts surveyed by Bloomberg.

Goldman, SanDisk

Goldman Sachs rose 1.3 percent to $159.33. The Wall Street bank with the highest return on equity last year said earnings that topped analysts’ estimates as investment-banking revenue jumped to the highest level since the financial crisis.

SanDisk Corp. jumped 8.7 percent to $82.45 for the biggest rally in the S&P 500. The maker of flash memory for mobile devices boosted its forecast for gross margin this year to between 47 percent and 49 percent. That’s up from its previous guidance range of between 45 percent to 48 percent and compares with analysts’ estimates that call for 47.4 percent.

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