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Stocks Down on Yellen, Russia Woes; Data, Earnings Eyed

Kevin O'Shaughnessy

U.S. Market
Stocks pared earlier gains and fell into the red by midday as global markets digested heavy news flow from multiple angles.

Fed chair Janet Yellen said in a recorded statement this morning that the Fed is considering additional regulations for the largest financial-services companies, particularly increasing the banks' capital targets above the currently required Basel III levels. Yellen noted the reasons behind the possible requirements are to better prepare these financial institutions to deal with short-term credit risks to avert another scenario like that of 2008.

Separately, global markets are closely monitoring developments in Ukraine, where Russian military forces have been spotted in eastern Ukraine, sparking fears that a civil war in the country is brewing.

Meanwhile, the key measure of inflation, the consumer price index, increased by 0.2% in March, seasonally adjusted, beating the expected increase of 0.1%. The CPI was 1.5% higher year over year, rising from February's year-over-year tally of a 1.1% increase. Although the CPI remains lower than the Fed's target of 2% annual inflation, the increase is drawing speculation that a rise in interest rates could happen sooner than expected.

The Dow was 0.4% lower at midday. The S&P 500 had fallen 0.5%, and the Nasdaq was down 1.4%.

Stocks on the Move
Johnson & Johnson (JNJ) reported first-quarter results that exceeded consensus expectations. Morningstar analysts attribute the outperformance largely to strong high-margin drug sales. The strength in J&J's most competitive division--pharmaceuticals--reinforces the analysts' conviction in the company's wide moat. Based on the strong quarterly results, J&J slightly increased its full-year earnings-per-share outlook to $5.80-$5.90. Shares were up 1% at midday.

Nestle's (NSRGY) first-quarter results came with little fanfare. Underlying sales ticked up 4.2%, reflecting 2.6% volume growth and 1.6% higher prices. However, strength in the Swiss franc had a pronounced impact on reported sales, which tumbled more than 5%. Similar to the past few quarters, growth was again skewed toward faster-growing emerging markets (which represent 45% of consolidated sales and popped 8.5%) compared with just a 0.6% increase in the firm's mature, developed markets. Management stood by its forecast of full-year 5% organic growth (at the low end of its 5%-6% long-term target) and an improvement in underlying margins, both of which are in line with Morningstar analysts' outlook. Shares were down 0.5% at midday.

Coca-Cola (KO) reported first-quarter net income of $1.62 billion versus $1.75 billion from the same time last year. Revenue fell to $10.58 billion but was still higher than Wall Street expectations. Adjusted earnings per share were in line with expectations. The beverage giant's global soda volumes increased 2%, while its nonsoda volumes rose 8%. Shares had gained more than 4% by midday.

Foreign Markets
Global stocks were mostly lower on concerns in Ukraine and ahead of key data from China.

The FTSE 100 had lost 0.6%, and the Paris CAC was down 0.9%. The DAX was 1.8% lower.

The Nikkei 225 rose 0.6%, but the Shanghai Composite and the Hang Seng lost 1.4% and 1.6%.