Stocks pressured as earnings reports offer conflicting narratives – MarketWatch

U.S. stocks whipsawed between gains and losses in Wednesday morning as investors continued to process new earnings releases, while offering a muted reaction to data that showed China’s economic growth stabilized.

What are major indexes doing?

The Dow Jones Industrial Average DJIA, -0.18%   fell 11 points, or less than 0.1%, to 26,442, while the S&P 500 index SPX, -0.26% rose less than a point to 2,907. The Nasdaq Composite index COMP, -0.14% was up 15 points at 8,015, an advance of 0.2%.

See: U.S. stock-market euphoria may be nearing a dangerous level, says RBC strategist

The S&P 500 on Tuesday ended just 0.8% away from its all-time closing high of 2,930.75 set on Sept. 20, while the Dow and Nasdaq each stand around 1.4% away from their record closes set last year.

What’s driving the market?

Investors continue to wade through corporate results as the earnings season moves into full swing, with an earnings miss from International Business Machines Inc. IBM, -2.98% caused the stock to fall 2.3%, weighing heavily on the Dow.

Health care stocks were also burdening the market, led by insurers Athem Inc. ANTM, -5.83% Cigna Corp. CI, -4.59%   and Dow component UnitedHealth Group Inc. UNH, -4.37% which was down 2.8% on the day after falling 4% Tuesday. Analysts pointed to the ongoing debate over health care reform, which has taken center stage in the race for the Democratic nomination for president, and which could significantly affect profits in the managed care and health services sectors if reform legislation is ultimately passed.

Chinese government data showed the country’s economy grew at a 6.4% rate, year-over-year in the first quarter of 2019, maintaining the pace seen in the last quarter of 2018 as factory output picked up steam. The figure was slightly higher than many economists expected.

The data failed to provide much spark to European markets, but analysts said signs of stability could soothe investor worries about the world’s second-largest economy. Stock-market gains since the end of last year have been tied in part to expectations for stimulus efforts by Chinese authorities and a potential deal to end the U.S.-China trade battle that would limit the scope of the country’s slowdown and alleviate fears of a global economic crunch.

What stocks are in focus?

Shares of Netflix Inc. NFLX, -0.24%   have whipsawed between gains and losses following the release of its first-quarter earnings, Tuesday evening. The company announced a record number of subscribers, but issued guidance for second quarter that some have interpreted as disappointing. After rising as much as 2.4% at the start of trade Wednesday, it fell 0.8%.

Read: Netflix is burning money and lacks a good business model, this tech investor says

Shares of Qualcomm Inc. QCOM, +10.57%  were up more than 12.9%, after soaring more than 20% on Tuesday after the chip maker and Apple Inc. AAPL, +1.38% settled patent litigation against each other.

Opinion: Qualcomm gets big windfall in surprise settlement, but Apple may have saved the iPhone from 5G doom

Following the settlement, chip maker Intel Corp. INTC, +3.42%  said it would get out of the business for 5G modem chips in which it was trying to compete with Qualcomm. Intel shares were up 4.8% Wednesday morning.

Shares of PepsiCo Inc. PEP, +3.46%  were up 3%, after the beverage and snack giant Wednesday morning reported first-quarter profit and revenue that topped Wall Street expectations.

Shares of Bank of New York Mellon Corp. BK, -9.82% fell 8.7%, after the financial services company reported sharper declines in first-quarter sales and profits than Wall Street had expected.

Morgan Stanley MS, +1.68% stock rose 2.6% Wednesday morning, after the company reported first-quarter profit and revenue that fell less than expected.

Shares of United Continental Holdings Inc. UAL, +4.40% rose 2.6%, following the airliner’s release of earnings figures Tuesday evening that beat analyst forecasts.

What are the analysts saying?

“We’re in the early days of earnings season, but it feels like first-quarter earnings will be a bottom, and that’s getting baked into expectations,” Kevin Divney, senior portfolio manager at Russell Investments, told MarketWatch.

“The week after next is when we have the bulk of earnings, so we’re at a pause here” as investors don’t yet have a broad enough picture of management expectations for the remainder of the year, he added.

“It’s still much too small a sample size to generate conclusions, but the bottom line is that earnings season is not off to a very good start,” wrote Tom Essaye, president of the Sevens Report in a Wednesday morning research note. “While stocks are looking past that courtesy of dovish Fed speak and hopes of better global growth, earnings will need to get better during the next two weeks—because so far the results, while not a disaster, aren’t that great.”

What’s on the economic calendar?

The U.S. trade deficit fell 3.4% in February to the lowest level in eight months, the Commerce Department said Wednesday.. Meanwhile, wholesale inventories in the U.S. rose a mild 0.2% in February, the government said Wednesday. Sales increased 0.3% in the month. The ratio of inventories to sales was flat at 1.35.

Philadelphia Fed President Patrick Harker will give a speech on the economic outlook at 12:30 p.m., while St. Louis Fed President James Bullard will give a speech at the Hyman Minksy Conference in New York at 12:45 p.m. Bullard is a voter on the Fed’s interest-rate committee this year, while Harker is not.

At 2 p.m., the Federal Reserve will issue its Beige book, a collection of anecdotal reports from the central bank’s business districts, reflecting a snapshot of U.S. economic conditions.

How are other markets trading?

Stocks in Asia closed mostly higher on Wednesday, with China’s Shanghai Composite Index and Japan’s Nikkei 225 both rising 0.3%. Hong Kong’s Hang Seng Index, meanwhile, ended the day flat.

In Europe, stocks were edging higher, as the Stoxx Europe 600 SXXP, +0.10% rose 0.1%, while Germany’s DAX DAX, +0.43% and France’s CAC 40 PX1, +0.62% were also up on the day.

In commodities markets, the price of crude oil CLK9, +0.20% was on the rise, while gold prices ticked lower. GCM9, -0.05% The U.S. dollar DXY, -0.06% meanwhile, edged lower.

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