U.S. Stocks Slightly Lower, Weighed Down by Energy Shares
16 July 2018 - 10:35PM
Dow Jones News
By Ben St. Clair and Allison Prang
-- U.S. stocks mixed
-- Oil prices fall on supply concerns
-- Banks report strong earnings
The S&P 500 inched slightly lower Monday as shares of energy
companies fell alongside a decline in oil prices and as investors
looked ahead to a busy week of corporate earnings results.
The broad stock-market index fell 2.88 points, or 0.1%, to
2798.43, while the technology-heavy Nasdaq Composite dropped 20.26
points, or 0.3%, to 7805.72. Both indexes snapped two-day winning
streaks. The Dow Jones Industrial Average ticked up 44.95 points,
or 0.2%, to 25064.36.
Energy stocks were by far the weakest of the S&P 500's 11
sectors, falling 1.2%, on lower oil prices. U.S. crude settled down
4.2% at $68.06 amid concerns that Russia would increase output
beyond what it agreed to last month.
Investors appear so far to have largely shrugged off trade
concerns, and U.S. stocks have been lifted by strong U.S. economic
data and positive earnings expectations in recent sessions. In the
S&P 500, 60 companies are on tap to report quarterly results
this week.
Before the market opened, Bank of America -- the second-largest
U.S. bank by assets -- posted second-quarter earnings that beat
expectations, sending shares up $1.23, or 4.3%, to $29.78.
The results helped buoy financial stocks, which were the best
performers in the S&P 500 on Monday, up 1.8%. The KBW Bank
index climbed 2.1%.
BlackRock also reported higher-than-expected earnings, but its
shares fell 3.13, or 0.6%, to 503.96 as the money manager pulled in
significantly less investor cash than a year earlier. Goldman Sachs
and Morgan Stanley are slated to report Tuesday and Wednesday
mornings, respectively.
Shares of Netflix, which reported its latest results after the
market closed, fell 13% in after-hours trading after the company
missed its new subscriber estimates by more than one million, which
the company attributed to faulty internal guidance.
Aaron Clark, portfolio manager for GW&K Investment
Management, said earnings growth is either peaking or has already
peaked and that strong results are largely priced into stocks. The
latest reports alone won't push the market to new highs, he
said.
Although he tends to look at specific stocks as opposed to
sectors, Mr. Clark said he is looking at utilities, which are
appealing because they have underperformed this year. That sector,
along with real estate, is a more defensive play for investors
because of its steady dividend payments.
Phil Orlando, chief equity strategist for Federated Investors,
said the more prominent story around earnings will likely be "soft"
guidance from companies as a result of issues like trade and the
yield curve narrowing, among other things.
"Managements by and large have no reason to go out on a limb
here," he said. Mr. Orlando said his firm slightly reduced its
exposure to stocks a couple of weeks ago because it wanted to
collect its profits before a potentially bumpy summer.
Still, expectations for strong earnings have largely helped
overshadow trade tensions. The Dow industrials have gone up all but
one day since the U.S. and China began imposing tariffs on $34
billion of each other's goods on July 6.
"It is hard to pin something truly tangible to" recent stock
market gains since many explanations have been true for months,
said Simon Derrick, chief currency strategist at BNY Mellon. "You
can try to create a narrative around it, but it hasn't always
worked out."
Meanwhile, Asian stocks have been hit harder by the trade
disputes, with major indexes down so far this year. Shanghai stocks
have shed nearly 15%, and economists estimate trade conflicts could
cut 0.2 to 0.5 percentage point off China's gross domestic product
in the coming year.
On Monday, GDP data revealed a slowing Chinese economy in the
second quarter, weighed down by government initiatives to rein in
risky borrowing and lending. The 6.7% remains above the
government's 6.5% target, but key statistics pointed to a slowing
economy.
The Shanghai Composite Index fell 0.6% Monday, following its
largest one-week percentage gain since June 2016.
In Europe, the Stoxx Europe 600 fell 0.3%. Banks outperformed in
Europe as shares in Deutsche Bank added 7.3% after the bank's
preliminary second-quarter results beat expectations.
Write to Allison Prang at allison.prang@wsj.com
(END) Dow Jones Newswires
July 16, 2018 17:20 ET (21:20 GMT)
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