Stocks Drop Ahead of Earnings Reports 04/27 16:29
U.S. stocks slumped on Monday as investors looked ahead to a flood of
earnings reports this week.
NEW YORK (AP) -- U.S. stocks slumped on Monday as investors looked ahead to
a flood of earnings reports this week.
Stocks appeared headed for new highs in the morning, but drifted lower in
afternoon as health care companies dropped sharply. Mylan, a maker of generic
drugs, slumped nearly 6 percent. It was a downbeat note after strong gains last
week, capped by a new record in the Nasdaq composite, 15 years after its
dot-com era peak.
With little news and stocks at highs, "I think we have some profit-taking
here," said chief stock strategist Phil Orlando, of Federated Investors as
stocks started moving lower in the afternoon.
The Dow Jones industrial average fell 42.17 points, or 0.2 percent, to close
at 18,037.97. The Standard & Poor's 500 index fell 8.77 points, or 0.4 percent,
to 2,108.92. The Nasdaq fell 31.84 points, or 0.6 percent, to 5,060.25.
The drops were broad, with seven of the 10 industry sectors of the S&P 500
down for day. Health care stocks fell the most, down 1.8 percent
One bright spot was Dow index component DuPont, which rose 4.6 percent after
activist investor Nelson Peltz gained a powerful backer Monday in his effort to
split the chemical maker into two companies. Proxy advisory firm Institutional
Shareholder Services recommended shareholders give the billionaire investor two
seats on DuPont's board.
More than 150 companies in the S&P 500 report quarterly results this week,
including Ford, Visa, Pfizer and Exxon Mobil. Investors are anxious because
falling oil prices and a strengthening dollar have hammered first-quarter
results at some companies. Per-share earnings for the S&P 500 are expected to
fall 0.8 percent from a year earlier, according to S&P Capital IQ, a provider
of financial data.
That would be the first drop since 2009, though it is better than the 2.4
percent drop expected two months ago.
Investors are also worried about slumping revenue at many companies, thanks
in part to the stronger dollar. That makes money generated overseas by big
companies here worth less when translated back into the U.S currency. Companies
can compensate by cutting costs, but it's not easy given all the cutting
"We're at the point in the cycle where revenue needs to pick up, but it's
not," said David Lebovitz, global market strategist at J.P. Morgan Asset
Management. He added, "I'm not so sure companies can slash their way to
earnings; they're running pretty leanly."
Investors are also looking ahead to Wednesday when the Federal Reserve ends
a two-day meeting where policymakers will discuss when to raise a key interest
rate that has been held near zero for 6 years. After its March meeting, the
Fed opened the door to a rate increase this year by no longer saying it would
be "patient" in starting to raise its benchmark rate.
The government also releases its estimate of economic growth in the
January-March quarter. Gross domestic product is expected to have risen 1
percent, down from 2.2 percent in the previous quarter.
The rise in U.S. stocks in the morning followed gains in European markets
that built toward their close. Investors were encouraged by news that Greece
had reshuffled its team that is negotiating a bailout, raising hopes that it
will be able to avert a default.
Some see the shake-up as a way to reduce the clout of Finance Minister Yanis
Varoufakis, who has been criticized for failing to put together a list of
changes that the country's European creditors want before they release new
loans. Greece's government is expected to run out of money to pay its bills in
another few weeks.
The Greek stock index rallied on the news, closing up 4.4 percent. France's
CAC-40 index rose 1.3 percent and Germany's DAX jumped 1.9 percent.
In other stocks making moves, Applied Materials fell $1.83, or 8 percent, to
$19.97 after calling off its $9.4 billion acquisition of Tokyo Electron Ltd.
The two big semiconductor industry suppliers said that they were told by the
Department of Justice that there were antitrust concerns.
Mylan dropped after the drugmaker rejected a $40 billion buyout offer from
Teva Pharmaceuticals, a cash-and-stock deal that Mylan says undervalues it. The
stock fell $4.34 to $71.72.
The dollar rose to 119.09 yen from 118.95 yen. The euro rose slightly to
$1.0885 from $1.0883.
U.S. government bond prices fell, pushing up the yield on the 10-year
Treasury to 1.93 percent.
The price of oil fell slightly Monday as concerns about hefty supplies
offset signs that oil companies are cutting production. U.S. oil slipped 16
cents to $56.99 per barrel. Brent crude, a benchmark for many international
oils used by U.S. refineries to make gasoline, fell 45 cents to $64.83 in
In other energy futures trading:
--- Wholesale gasoline was flat at $2.01 per gallon
--- Heating oil slipped 0.7 cent to $1.921 per gallon
--- Natural gas fell 4.1 cents to $2.49 per 1,000 cubic feet.