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US: Stocks hold gains despite key blue-chip earnings drops

Wednesday, April 20, 2016 - 06:47

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[NEW YORK] US stocks mostly ended with modest gains on Thursday despite Goldman Sachs and IBM turning in significant first-quarter earnings disappointments.

But tech stocks were pulled downward by a selloff of Netflix on its weaker-than-expected projections and expectations that Google parent Alphabet will be hit with formal antitrust charges in Europe on Wednesday.

The Dow Jones Industrial Average finished up 49.44 points (0.27 per cent) at 18,053.60.

The broad-based S&P 500 rose 6.46 (0.31 per cent) to 2,100.80.

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The tech-rich Nasdaq Composite Index lost 19.69 (0.40 per cent) at 4,940.33, led by Netflix's 13 per cent plunge.

The broader market held up even as Goldman Sachs was the latest big bank to report a significant downturn in the first quarter.

Profits were off by 56 per cent on a 40 per cent drop in revenues to US$6.3 billion.

Goldman shares fell sharply at the opening bell but recovered to add 2.2 per cent. The shares had slid over the past several days in reaction to the poor earnings reports of other major banks.

IBM shares tumbled 5.6 per cent after revenues fell for the 16th straight quarter, down 4.6 per cent from a year ago to US$18.6 billion. But the technology giant, struggling to carve out space in the cloud computing industry, easily beat net earnings forecasts.

Even so, overall the Dow and S&P 500 were supported by strong quarterly earnings reports from Johnson & Johnson, which rose 1.6 per cent, and UnitedHealth Group, up 2.1 per cent.

Peter Cardillo of First Standard Financial said the market "is looking tired. The earnings are coming in, most of the companies are beating expectations - that were low, obviously." "I think it's only a matter of time before this market runs out of steam and has a little bit of a correction."

Tech stocks were pulled lower after Netflix warned investors that subscription gains would be slower than expected, just 500,000 US subscribers in the current quarter, about 15 per cent below analyst predictions.

Google dropped 1.7 per cent as it faced possible charges in Europe over how it markets its Android operating system, which dominates the cellphone industry.

The European Union is looking at whether Google gives unfair prominence to its own apps such as maps or music streaming in deals with mobile manufacturers such as Samsung or Huawei.

AFP

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