US housing data weigh on Wall Street

Investors on Wall Street took a negative view on a number of earnings reports, including from Johnson & Johnson, but the wider markets were flat after mixed economic data.

The healthcare group posted profits down 12 per cent on the previous year and below analysts’ expectations. This was mainly due to a $922m charge related to the ASR hip recall from its DePuy subsidiary. The company also issued a downbeat 2011 earnings forecast of $4.80 to $4.90 a share, less than the $4.97 a share projected by analysts.

William Weldon, chief executive, said that the company would continue to see near-term pressure on the business this year. Shares in Johnson & Johnson were down 1.8 per cent to $61.08.

In the wider markets, the S&P 500 was flat at 1,291.18 as a raft of mixed economic data from home and abroad failed to provide direction to the market.

Figures from the Conference Board showed that US consumer confidence had increased by considerably more than forecast in December. But separate data showed that house prices were continuing to fall, according to the Case-Shiller index.

Looking abroad, news that UK gross domestic product shrunk in the fourth quarter and that India had raised interest rates again weighed on sentiment, in particular dragging down commodity-related stocks.

Murphy Oil , the oil and gas exploration and production company, was down 1.4 per cent to $71.04 while Cliffs Natural Resources , the iron ore and coal miner, lost 1.5 per cent to $81.74.

The Dow Jones Industrial Average was flat at 11,977.19, maintaining the two-year highs reached in the previous session, while the Nasdaq Composite was fractionally up after a late rally to 2,719.25.

The session was one of the busiest days for earnings reports, and overall the market reacted negatively to the results.

While many results came in below forecasts, even many forecast-beating results failed to impress investors. Analysts said this had been one of the key stories of the earnings season so far, with many stocks like Schlumberger, Google, and F5 Networks losing ground on the day that strong earnings are released due to market expectations of blockbuster results.

“Last quarter, expectations were lower so strong results were more of a market driver, but this quarter people are generally more optimistic so the earnings bar has been set higher,” said Todd Salamone, director of research at Schaeffer’s Investment Research.

Investors were disappointed by results from 3M , for example, even though the earnings came in slightly ahead of analysts’ expectations. The maker of office, medical and industrial products, posted a fourth-quarter profit of $928m, or $1.28 a share.

The results topped analysts’ forecasts and 3M raised its 2011 earnings forecast, but its shares were down 2 per cent to $88.50.

Shares in Texas Instruments also saw losses despite posting earnings ahead of expectations. The chipmaker reported fourth-quarter revenues of $3.53bn and earnings per share of 78 cents, which exceeded expectations of 64 cents a share. But its shares were down 1.9 per cent to $33.98.

In other earnings news, American Express , the biggest US credit-card issuer by purchases, reported disappointing fourth-quarter earnings. A $74m charge tied to job cuts in its servicing network dragged on the figures, but even without the charge the company would have earned 94 cents a share, less than the average estimate of 96 cents by analysts. The stock fell 2.2 per cent to $44.80.

Investors on Wall Street were also looking towards the State of the Union address which was to be delivered on Tuesday night. “President Obama’s State of the Union address is likely to be more pro-business in contrast to the anti-business tone of last year’s address,” said Jeffrey Kleintop, chief market strategist at LPL Financial.

Also in earnings news, DuPont the world’s second-biggest chemicals maker by market capitalisation, was up 0.3 per cent to $49.04 after mixed results which saw revenue increase but profits fall due to charges.

Verizon Communications was up 1.6 per cent to $35.79 after the company posted earnings per share of 54 cents on revenue of $26.4bn.

In deal news, Amgen said it had agreed to buy BioVex Group, a private cancer drug company, for up to $1 billion, sending shares in Amgen down 0.2 per cent to $57.16.

The biotechnology group said it would pay $425 million up front and as much as $575 million in additional payments.

The deal, which has been approved by the boards of both companies, is due to be completed in March when BioVex will become a subsidiary of Amgen.

The announcement came as Amgen reported better-than-expected fourth-quarter results but gave 2011 earnings estimates that were less than analysts had estimated.