Stocks Lower as Earnings Season Starts With Qualms Over Growth
July 17 2019 - 12:39PM
Dow Jones News
By Lauren Almeida and Asjylyn Loder
U.S. stocks fell Wednesday as the start of earnings season
exposed some weakness in companies, potentially damping investors'
outlook for economic growth.
The S&P 500 declined 0.4%, while the Dow Jones Industrial
Average and the Nasdaq Composite both fell 0.3%.
Executives reporting earnings have voiced concern about their
growth prospects as they face a muddy economic outlook and a
high-profile trade dispute between the U.S. and China. Major
benchmarks had rallied to record heights since Federal Reserve
Chairman Jerome Powell signaled last week that the central bank
would likely cut interest rates as early as this month. He
strengthened those expectations this week when he told an audience
in Paris that the central bank is "carefully monitoring" the risks
to U.S. growth.
But the market has already priced in the Fed's move and
investors are now focused on the financial outlook for U.S.
companies, said Peter Cecchini, chief market strategist at Cantor
Fitzgerald & Co.
"[The rate cut is] sort of in the rear view mirror, barring any
spectacularly bad data to come out between now and then," Mr.
Cecchini said. "People are now more focused on earnings."
On Wednesday, the industrial sector was one of the biggest drags
on the S&P 500. Shares of railroad company CSX fell 10.5% after
it cut its annual outlook late Tuesday, citing economic uncertainty
and a recent shutdown of a major oil refinery it served. The fall
pulled down other railroad companies, sometimes viewed as an
economic bellwether, with Norfolk Southern down 4.9% and Union
Pacific slipping 4.7%.
"The present economic backdrop is one of the most puzzling I've
experienced in my career," CSX chief executive Jim Foote said on
the company's earnings call Tuesday.
Corporate leaders are "resetting expectations" as they announce
financial results, said Lindsey Bell, investment strategist for
CFRA.
"You're getting a feel for the real impact of trade and tariffs
on earnings and on the outlook," Ms. Bell said.
Bank of America advanced 0.5% to $29.15 a share Wednesday after
i t reported a profit in its most recent quarter. Netflix, eBay,
IBM and Alcoa, along with several smaller regional banks, are due
to report later in the day.
Amazon shares were down 0.6% after the European Commission said
it would launch an antitrust investigation into its dealings with
third-party merchants. The probe is part of a wider push from the
European Union against American tech giants such as Facebook and
Google-parent Alphabet.
In Europe, the Stoxx Europe 600 switched between small losses
and gains after a mixed session in Asia. Telecommunications
equipment maker Ericsson slid on concerns about higher costs that
led to a narrower-than-expected operating margin, according to
Citigroup analysts.
The yield on 10-year Treasurys fell to 2.084% Wednesday from
2.124% Tuesday, according to Tradeweb. Yields fall when bond prices
rise.
U.S. benchmark oil futures fell 0.9% to $57.13 a barrel. Gold
was up 0.8% to $1,423 per troy ounce.
Bitcoin fell, trading below $10,000 for a second day as U.S.
senators questioned Facebook over its proposed Libra
cryptocurrency, highlighting the skepticism that digital-coin
systems face from regulators. Bitcoin has lost almost a third of
its value, according to research site CoinDesk, after trading above
$13,000 a week ago.
Write to Lauren Almeida at lauren.almeida@wsj.com and Asjylyn
Loder at asjylyn.loder@wsj.com
(END) Dow Jones Newswires
July 17, 2019 12:24 ET (16:24 GMT)
Copyright (c) 2019 Dow Jones & Company, Inc.
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