Stocks mixed on first day of earnings season

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

The global aluminium company is seen as an economic bellwether because many industries use its products.

Alcoa's stock rose 2.2 per cent, the most of the 30 stocks in the Dow Jones industrial average. Alcoa fell 2.1 per cent last Friday after the company said it will reduce its smelting capacity by 12 per cent by closing smelters in the US and Europe. An analyst predicted that Alcoa will post its first quarterly loss since the recession.

The Dow rose 5 points to 12,364 as of 12:20 p.m. (1720 GMT).

Slower growth in Europe and emerging economies likely limited profit growth for US multinational companies in the October-December period, analysts say. Materials companies such as Alcoa are suffering as construction slows in emerging markets such as China, whose recent construction booms fuelled 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.

Offseting demand

However, analysts with S&P Capital IQ said rising market prices should offset lower demand for producers of some materials such as steel, industrial gases, and chemicals. Profits might decline since the third quarter, but those sub-industries will likely do better than in the same quarter a year earlier, the analysts said in a research note.

In other trading, the Standard & Poor's 500 index fell a fraction. The Nasdaq composite index dropped 2 points, or 0.1 per cent, to 2,671.

The Nasdaq is now up 2.6 per cent for the year, compared to 1.2 per cent for the Dow and 1.6 per cent for the S&P 500.

Fourth-quarter earnings growth for companies in the S&P 500 increased only modestly over 2010, after sharp increases in the first three quarters of 2011, analysts said. Companies had an easier time improving on their results from 2009, when the nation was just emerging from recession.

European markets fell in late trading as French and German leaders met to craft the regional fiscal treaty that they agreed to pursue last year. It was their first crisis summit of 2012, after numerous such events last year.

The treaty would strengthen oversight of spending by countries that use the euro. Excessive borrowing by nations such as Greece and Italy has hurt the broader European economy and weakened stronger nations such as Germany and France.