Stocks Edge Lower as Earnings Season Marches On
August 04 2020 - 10:02AM
Dow Jones News
By Caitlin Ostroff
U.S. stocks slipped Tuesday as a slew of major companies
reported earnings, some of them beating already low expectations
from coronavirus economic troubles.
The S&P 500 declined 0.2% in early New York trading, while
the Dow Jones Industrial Average fell 22 points, or 0.1%, while the
tech-heavy Nasdaq Composite Index was essentially flat. The
pan-continental Stoxx Europe 600 fell 0.5%.
In earlier premarket trading, shares in Take-Two Interactive
Software Inc., the company behind Grand Theft Auto and other gaming
franchises, rose 4.4% after it raised financial projections for the
year on higher demand for videogames during the pandemic.
Shares in game maker Activision Blizzard and Sony Corp.'s
U.S.-traded shares rose 2.4% and 2.8%, respectively. Shares in
Emerson Electric rose 2% after the conglomerate raised its
full-year expectations following global economic reopenings.
In Europe, shares in BP climbed 5.4% after the British
oil-and-gas producer slashed its quarterly dividend for the first
time in a decade and launched a new strategy to pivot away from oil
and gas. Discount airline easyJet rose more than 8% on a
better-than-expected outlook.
More than three-quarters of S&P 500 companies have reported
earnings, with the majority beating analyst expectations, according
to UBS. This has led estimates for the third quarter to rise by
2.5% since the end of June.
Robust earnings from tech companies have lifted U.S. stock
markets higher in recent weeks, with the Nasdaq Composite climbing
to a fresh record Monday.
Investors, who worried that an uptick of coronavirus infections
last month would slow economic recovery, have been closely watching
a recent decline in new cases.
"One day's data doesn't mean anything, but I'm looking at
whether that's the beginning of a trend," said Fahad Kamal, chief
market strategist at Société Générale's private banking and wealth
management division Kleinwort Hambros.
Bond markets have remained cautious though, with bond yields
ticking lower even as stocks have climbed, Mr. Kamal said. The
yield on the 10-year Treasury declined to 0.526% from 0.562%
Monday.
"There's more truth in the bond market, and if you look at the
yields they're still at record lows. There's still a very palpable
sense of fear among investors that there could be tail risks that
materialize," he said.
Markets are monitoring negotiations among Democratic leaders and
White House officials on a new coronavirus aid package. The two
sides remain at odds over whether to cut a $600-a-week federal
jobless supplement or provide aid to financially strapped states
and localities.
"The market's assumption is that the U.S. economy is not yet
ready to stand on its own two feet. It appears that there is
agreement that more needs to be done, it's just about the shape of
that package," said Hugh Gimber, strategist at J.P. Morgan Asset
Management.
Shares in spirits maker Diageo, which owns Johnnie Walker
whiskey and Smirnoff vodka among other brands, fell 5.7% after it
reported that operating profit fell as the coronavirus pandemic
drove down sales in the second half of the year. North American
sales were strong as consumers shifted alcohol buying from bars to
grocery stores, but the growth didn't make up for shortfalls in
other markets.
Shares in Bayer fell 3% after the chemicals and pharmaceuticals
company said it swung to a net loss of EUR9.55 billion ($11.23
billion) in the second quarter. Bayer set aside provisions for its
multibillion-dollar settlement with plaintiffs alleging the
company's Roundup herbicides cause cancer. Shares in WeWork
competitor IWG fell 3.1% after the flexible-workspace company said
it swung to a loss for the first half and scrapped its
dividend.
In the Asia-Pacific region, Hong Kong's Hang Seng climbed 2%,
leading gains in the region. Japan's Nikkei 225 gained 1.7% and
Australia's benchmark S&P/ASX 200 rose 1.9%.
In commodities, global benchmark Brent crude oil fell 1.8% to
$43.36 a barrel.
Walt Disney will report earnings after trading ends.
Write to Caitlin Ostroff at caitlin.ostroff@wsj.com
(END) Dow Jones Newswires
August 04, 2020 09:47 ET (13:47 GMT)
Copyright (c) 2020 Dow Jones & Company, Inc.
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