Lackluster spate of earnings and weak economic data affect momentum
U.S. stocks finished lower on Tuesday, 25 October 2016 giving back some of the previous day's advance as worries about a lackluster spate of earnings and a slip in a reading of consumer confidence weighed on market sentiment. A drop in the price of oil below $50 a barrel, lingering uncertainty about the U.S. presidential election and growing expectations of a rate increase by the Federal Reserve, also contributed to the downbeat mood.
The Dow Jones Industrial Average declined 53.76 points, or 0.3%, at 18,169.27, as shares of Home Depot weighed on blue-chips with a 3.2% decline. Earlier, the average had been down as many as 71 points. The Nasdaq Composite Index gave up 26.45 points, or 0.5%, to wrap at 5,283.40. The S&P 500 declined by 8.17 points, or 0.4%, to 2,143.16.
Nine of the 11 main sectors ended in the red. The consumer-discretionary closed off 1.2%, while materials lost 1%.
Shares of Dow component 3M fell 2.9% after reporting earnings that beat Wall Street expectations, but the company posted sales that were flat relative to the prior year and reduced the top end of its yearly earnings forecast.
Market participants have been wrestling with third-quarter earnings that have outperformed lowered expectations, but a number of companies have cut their annual outlooks, which has raised questions about future earnings. Investors were eager to find out the results from two of the tech giants this week, with Apple reporting after the closing bell on Tuesday.
Traders continued to eye economic data for hints on the prospects for a Federal Reserve interest-rate increase before the end of the year. Higher rates tend to send investors away from precious metals into investments that carry a yield.
A reading on consumer confidence Tuesday showed a decline to 98.6 in October, a three-month low, from 103.5 in September. The FHFA Housing Price Index for August rose 0.7%, which followed an increase of 0.5% in July.
Separately, the Case-Shiller 20-city Home Price Index for August rose 5.1%, which fell in-line with the consensus. This followed the previous month's unrevised reading of 5.0%.
Shares in Whirlpool dropped 11% after the appliance maker reported third-quarter profit and sales that missed expectations, and issued a downbeat outlook. Merck & Co. rose 2% after the drugmaker's third-quarter earnings and sales came in above expectations. Chemicals maker DuPont& Co. shares fell 0.7% despite the company raising its yearly profit forecast and better-than-expected quarterly earnings. The company is working on its merger with Dow Chemical. Procter & Gamble gained 3.4% after the consumer goods company reported earnings ahead of forecasts. Lockheed Martin shares jumped 7.4% after the aerospace company posted higher-than-expected revenue and hiked its dividend. Baker Hughes shares rallied 4.3% after the oil-field services company reported a narrower-than-expected loss.
General Motors shares ended down 4.2% even as auto giant's quarterly profit doubled. GM also posted higher revenue on strong U.S. truck sales. But it signaled continued weakness in Europe because of the fallout from the U.K.'s pending exit from the European Union, or Brexit.
Crude futures fell on Tuesday, 25 October 2016 with prices in New York settling below $50 a barrel for the first time in just over a week, pressured by the possibility that the Organization of the Petroleum Exporting Countries' plan to curb output will fail after Iraq signaled unwillingness to take part in the proposed deal.
December West Texas Intermediate crude fell by 56 cents, or 1.1%, to settle at $49.96 a barrel on the New York Mercantile Exchange. That was the lowest settlement and first finish below $50 since 17 October 2016.
OPEC members in late September reached a preliminary agreement to limit the group's daily production to between 32.5 million to 33 million barrels a day.
Bullion prices ended higher at Comex on Tuesday, 25 october 2016. Gold futures settled Tuesday at their highest level in about three weeks, rebounding from the previous day's decline as uncertainty ahead of the U.S. presidential election, some weakness in the U.S. dollar and a fall in domestic equities boosted the metal's appeal.
December gold rose $9.90, or 0.8%, to settle at $1,273.60 an ounce. Prices settled at their highest level since 3 October 2016. Prices are still down about 3.1% so far this month. December silver gained 17.6 cents, or 1%, to $17.78 an ounce.
Treasuries finished on a mixed note with the short end of the curve underperforming. The yield on the 2-yr note rose two basis points to 0.86% while the yield on the benchmark 10-yr note ended down one basis point at 1.76%.
Today's trading volume was below the average of 853 million as 819 million shares changed hands at the NYSE floor.
Tomorrow's economic data will include the weekly MBA Mortgage Index and International Trade in Goods for September, which will be released at 7:00 ET and 8:30 ET, respectively. The day's data will be capped off with the 10:00 ET release of New Home Sales for September (consensus 610k).
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