Weak Earnings and Future Inflation Fears Pull Stocks Lower
The major U.S. markets are moderately lower this afternoon. As of 12:50 p.m. EDT the Dow Jones Industrial Average is down 42 points, or 0.27%, while the S&P 500 has lost 0.45% and the Nasdaq is 0.33% lower. Earlier today it was reported that homebuilder confidence is now at its highest level in seven and a half years and that industrial production rose in June. But investors are now seeing signs that the economy may not be as strong as it seems and may face serious challenges in the future. A few earnings reports (more on those below) and inflation concerns are sending stocks lower today. The Bureau of Labor Statistics released its Consumer Price Index today, reporting that prices rose 0.5% in June. While the bulk of the increase owed to higher energy prices, which rose 3.4%, the CPI is up 1.6% over the past year, and when you take out food and energy, the core CPI rose 0.2% in June.
On to earnings
As earnings season marches on, two Dow components released results this morning. Coca-Cola reported earnings of $0.63 per share when excluding one-time items, which is in line with expectations, but it missed Wall Street's estimated revenue of $12.95 billion, posting sales of $12.75 billion. The company cited "bad weather" as a reason for its weakness. Its overall volume rose, even as its key product, sodas, realized a 4% volume decline. Shares of Coke are down 1.4% at the time of writing.
Johnson & Johnson also delivered quarterly results, beating estimates on both the top and bottom lines -- yet shares are nonetheless flat this afternoon. Johnson posted ex-item earnings of $1.48 per share on revenue of $17.88, topping expectations of $1.39 in EPS and $17.72 billion in revenue. But despite beating the Street, the management team did note a number of times during the conference call that the company is experiencing pricing pressure from the government and insurance payers. Additionally, the company cited changes in the "dynamic global macroeconomic environment" as a reason to be concerned about revenue growth.
Although Disney has not yet announced second-quarter earnings -- they're scheduled to be released on Aug. 6 -- shares are down 1.3% today. The drop may be a continuation of yesterday's decline; the stock lost 1.6% on to lead the Dow's laggards yesterday after The Lone Ranger's second weekend at the box office turned out to be a massive disappointment. The movie, which is estimated to have cost the studio about $250 million, has only brought in just more than $70 million after two weeks in theaters.
That may sound like a big hit to Disney's bottom line, but don't forget that Disney is a veritable empire of successful brands and businesses, including networks like the highly profitable ESPN. However, the television landscape is changing quickly, with new entrants like Netflix and Amazon.com disrupting traditional networks. The Motley Fool's new free report "Who Will Own the Future of Television?" details the risks and opportunities in TV. Click here to read the full report!
The article Weak Earnings and Future Inflation Fears Pull Stocks Lower originally appeared on Fool.com.Fool contributor Matt Thalman owns shares of Walt Disney and Johnson & Johnson. Check back Monday through Friday as Matt explains what caused the Dow's winners and losers of the day, and every Saturday for a weekly recap. Follow Matt on Twitter @mthalman5513. The Motley Fool recommends Coca-Cola, Johnson & Johnson, and Walt Disney. The Motley Fool owns shares of Johnson & Johnson and Walt Disney. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
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