A rally on Wall Street slows; Priceline tanks

Stock rally slows on Wall Street; mixed earnings reports add to fears about European economy

Associated Press
A rally on Wall Street fades; Priceline tanks
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FILE - In a July 26, 2012 file photo trader Gregory Rowe, right, works on the floor of the New York Stock Exchange. Stronger corporate earnings reports and expectations that central banks will act to support the economy powered the Standard & Poor's 500 index past 1,400 Tuesday Aug. 7, 2012. (AP Photo/Richard Drew)

A stock market rally lost steam Wednesday after mixed earnings from U.S. companies added to fears about Europe's economic slowdown.

Several big consumer goods companies warned that weak demand in Europe was cutting into their revenue. That followed worrisome economic news from England, France and Germany, where growth had offset recessions in other European countries like Italy and Greece.

Major U.S. stock indexes were mixed in afternoon trading. The Dow Jones industrial average rose eight points to 13,176 as of 1:15 p.m. The Standard & Poor's 500 index added a fraction of a point to 1,401. The Nasdaq composite index fell four to 3,011.

The Dow had risen 290 points over the previous three trading days. On Tuesday, the S&P 500 passed 1,400 and the Nasdaq composite closed above 3,000, both for the first time since early May.

As stocks in New York traded tentatively, the dollar rose against the euro, a sign that investors are becoming more fearful.

"It's not unusual for the market to pull back a bit after a strong move, absorb the latest earnings news and look to see the next catalyst to move higher," Quincy Krosby, market strategist with Prudential Financial, said.

The market is being held back in part by reports from consumer-goods companies that weak sales in Europe are hurting revenue, Krosby said. Consumer discretionary stocks fell the most among the 10 industry groups in the S&P 500.

McDonalds fell $1.39, or 2 percent, to $87.62 after the company said a key revenue figure came in flat in July as the weakening global economy took a toll on customers of the world's biggest burger chain. McDonalds was the weakest stock in the Dow.

Priceline.com fell more than $100 after warning investors late Tuesday that its third-quarter revenue and income would come in far below anlaysts' forecasts because of the deepening malaise in Europe. Priceline's stock sank $108.20, or 16 percent, to $571.54.

Priceline's travails dragged on other online travel sites. Expedia and TripAdvisor both fell 5 percent. That made them three of the four biggest losers in the S&P 500 index.

Ralph Lauren fell $3.85, or 3 percent, to $149.18 after the company forecast a revenue decline in the current quarter and cautioned that the weak global economy might reduce spending on its clothes and housewares.

"It's no longer a theoretical argument that Europe is hampering earnings for American companies," Krosby said. "It's a reality, and you're seeing that today."

Earlier Wednesday, the Bank of England said it expects the country's economy to stagnate this year. Only three months earlier, in its previous quarterly inflation report, the BOE had forecast annual growth of 0.8 percent.

Separately, the French central bank said it expects France's economy to contract in the third quarter, the second pullback in a row.

Standard & Poor's lowered its outlook on Greece's long-term credit rating, saying the bailed-out nation will likely need more aid from its international lenders as its economy crumbles and leaders delay imposing harsh austerity measures.

And in Germany, industrial output and exports dropped sharply in June, a sign that Europe's strongest economy might finally be succumbing to the regional crisis.

Bloomin' Brands Inc., operator of the Outback Steakhouse and other restaurant chains, jumped $1.88, or 17 percent, to $12.88 in its first day of trading on the Nasdaq.

Among other companies making big moves:

— Macy's rose 95 cents, or 3 percent, to $37.95 after the department store chain said its net income in the second quarter rose 16 percent and beat analysts' estimates.

— Alpha Natural Resources fell 34 cents, or 5 percent, to $6.56 after reporting a wider net loss in the second quarter. The coal producer is struggling to compete with cheap natural gas.

— Dean Foods soared $4.49, or 36 percent, to $16.91 after the company posted a second-quarter profit, raised its full-year forecast and announced the initial public offering of a dairy subsidiary that makes Horizon Organic milk and Land O' Lakes butter. It was the biggest percentage gain of any stock in the S&P 500.

— Higher One Holdings Inc., which markets financial services to millions of U.S. higher education students, fell 31 cents, or 3 percent, to $11.20 after the company said its second-quarter net income declined and fell far short of analysts' expectations.

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Daniel Wagner can be reached at www.twitter.com/wagnerreports.

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