Stocks drift lower on first day of earnings season

Stocks wandered between small gains and losses early Monday as traders looked ahead to Alcoa Inc.’s fourth-quarter results, the unofficial start of corporate earnings season.

Alcoa will release its financial results after the market closes. The aluminum company is seen as an economic bellwether because many industries use its products.

Alcoa rose 2.3 percent, the most of the 30 stocks in the Dow Jones industrial average. Alcoa fell 2.1 percent on Friday after the company said it will reduce its smelting capacity by 12 percent by closing smelters in the U.S. and Europe. An analyst predicted that Alcoa will post its first quarterly loss since the recession.

Slower growth in Europe and emerging economies likely limited profit growth for U.S. multinational companies in the October-December period, analysts say. Materials companies such as Alcoa are hit hard by slower construction and development in nations such as China, where recent construction booms have fueled demand for metals and similar products.

“China, India, Latin America ? that’s where those companies have been really driving sales in the last few quarters,” said John Butters, senior earnings analyst at FactSet. “That’s probably why you see (earnings expectations) for basic materials companies down quite a bit.” He said investors should pay close attention to what companies say about their sales overseas.

However, analysts with S&P Capital IQ said rising prices for metals and other materials should help producers of steel, industrial gasses and chemicals. The results may fall from the previous quarter, but those sub-industries will do better than in the same quarter a year earlier, the analysts said in a research note.

The Dow fell 14 points, or 0.1 percent, to 12,346 in the first two hours of trading. The Standard & Poor’s 500 index fell 2, or 0.1 percent, to 1,276. The Nasdaq composite index dropped 5, or 0.2 percent, to 2,668.

The Nasdaq is now up 2.5 percent for the year, compared to 1.2 percent for the Dow and 1.5 percent for the S&P 500.

European markets were roughly flat as French and German leaders met to craft a regional fiscal treaty they agreed to pursue last year. It was their first crisis summit of 2012, after numerous such events last year.

The treaty aims to impose stronger oversight over the budgets of countries that use the euro. Excessive borrowing by nations such as Greece and Italy is weighing down the European economy and threatening stronger countries, such as Germany and France.

The French and German leaders stressed that they view boosting growth a priority, despite widespread spending cuts that are expected to slow economic activity in the region.

Germany’s DAX fell 0.6 percent. The FTSE in London fell 0.7 percent and France’s CAC 40 fell 0.4 percent.

Chinese markets rose after Premier Wen Jiabao promised to encourage lending to entrepreneurs who have been battered by weak global demand. Lending was tightened last year to cool China’s overheated economy. The nation has reversed course in recent months after global demand slumped, which hurt exporters and resulted in widespread layoffs.

In corporate news:

? CareFusion Corp. plunged 6 percent, the most in the S&P 500 index. The San Diego-based medical device maker announced preliminary results that were weaker than analysts had expected.

? Inhibitex Inc. soared 42 percent after Bristol-Myers Squibb Co. said over the weekend that it would buy the Alpharetta, Ga. maker of hepatitis C medicine for $2.5 billion. Other developers of hepatitis C treatments also rallied sharply. Idenix Pharmaceuticals Inc. jumped 34 percent and Achillon Pharmaceuticals Inc. rose 10 percent.


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