US STOCKS-Wall St down modestly on earnings caution; Merck gains

Reuters - UK Focus

* Investors looking ahead to bellwether company earnings

* Merck (Other OTC: MKGAF - news) up after FDA review, strategic options plans

* Suntory Holdings to acquire Beam (NYSE: BEAM - news) for $83.50 per share

* Lululemon, Sodastream, Express (NYSE: EXPR - news) fall after outlooks

* Indexes: Dow down 0.1 pct, S&P down 0.1 pct, Nasdaq flat

By Ryan Vlastelica

NEW YORK (Frankfurt: HX6.F - news) , Jan 13 (Reuters) - U.S. stocks dipped modestly onMonday as investors awaited an onslaught of corporate results togauge how companies are faring amid mixed signs on economicgrowth.

While early reads on the season have been strong, marketparticipants are looking for further justification that stocksare fairly valued with indexes near all-time highs.

Following a jump of almost 30 percent last year, the S&P 500is above the mean forward price-to-earnings ratio and is at itshighest level in nearly seven years. While earnings are seenrising 7.3 percent in the fourth quarter, according to ThomsonReuters data, the 9.8 ratio of negative guidance to positiveoutlooks is at a record.

"People are sitting on their hands, waiting for majorresults to figure out how strong this season may be," saidDouglas DePietro, managing director at Evercore Partners (NYSE: EVR - news) in NewYork.

DePietro was looking forward to results from JPMorgan Chase (Xetra: CMC.DE - news) & Co and Wells Fargo (Berlin: NWT.BE - news) & Co, both of which areslated to report on Tuesday. General Electric Co, GoldmanSachs and Intel Corp are also among the namesreporting this week.

Equity gains have largely come on accommodative monetarypolicies by the Federal Reserve, although not all economicindicators enjoyed a similar boost. The December payroll report,released on Friday, came in much lower than expected.

The Dow Jones industrial average was down 25.30points, or 0.15 percent, at 16,411.75. The Standard & Poor's 500Index was down 1.93 points, or 0.10 percent, at 1,840.44.The Nasdaq Composite Index was up 1.73 points, or 0.04percent, at 4,176.39.

Losses were limited in the Dow and S&P by Merck (Dusseldorf: 6MK.DU - news) & Co, which rose 2.9 percent to $51.33 after a preliminaryreview by the U.S. Food and Drug Administration said thecompany's experimental blood clot-preventing drug vorapaxarshould be approved.

In addition, the drugmaker said it is pursuing strategicoptions for its animal health and consumer businesses andexpects to complete any action it takes this year.

Equities have started 2014 on a lackluster note, dipping 0.3percent through the first seven trading sessions as marketparticipants tried to gauge the pace of the winding down ofmarket-friendly economic stimulus by the Federal Reserve.

In merger news, Beam Inc agreed to be acquired bySuntory Holdings Limited for $16 billion, including debt, whileBritish engineering firm Amec (Other OTC: AMCBF - news) said it had provisionallyagreed to buy Foster Wheeler (NasdaqGS: FWLT - news) in a cash and share dealthat values the company at $3.13 billion.

Shares of Beam jumped 24 percent to $83.16 while Foster rose1.3 percent to $31.86.

"Merger and acquisition activity continues to be anunderlying bullish sentiment for the market," said DePietro."It's one of the most positive things reflecting on the market."

A string of companies tumbled after forecasting earnings.

Lululemon Athletica Inc (NasdaqGS: LULU - news) fell 16 percent to $50.07after the yoga wear retailer cut its forecast for thefourth-quarter due to weak sales in January.

Sodastream International (NasdaqGS: SODA - news) slumped 21.2 percent to$39.30 after the home beverage system maker lowered its earningsoutlook for 2013. Apparel retailer Express Inc lost 3.2 percent to $18.41 after it lowered itsfourth-quarter outlook.

But Wendy's outlook was a bright spot, sendingshares up 8.3 percent to $9.14 after the fast-food restaurantchain estimated adjusted quarterly earnings above analysts'expectations, as expenses fell due to franchising manycompany-owned outlets.

View Comments (0)