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US: Stocks slide amid health-care earnings, Apple sales outlook

Thursday, October 27, 2016 - 06:27

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[NEW YORK] US stocks retreated amid a disappointing forecast from Apple Inc. and as a plunge in Edwards Lifesciences Corp dragged health-care shares lower, overshadowing a rally in Boeing Co and among banks.

Equities reversed direction in afternoon trading as energy producers faded with crude oil and health-care companies extended losses. Edwards Lifesciences dropped the most in three years after its sales missed estimates, while Apple slid 2.8 per cent, weighing on the technology group as its holiday sales outlook was a letdown.

Countering declines, Boeing Co jumped the most in a year following its report, and the KBW Bank Index rose to its best level this year as Treasury yields approached June highs.

The S&P 500 Index fell 0.2 per cent to 2,138.33 at 3.09 pm in New York, after briefly erasing a 0.5 per cent slide when crude oil wiped out losses on signs of lower supplies.

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The benchmark renewed declines as oil once again lost momentum. The Dow Jones Industrial Average added 30.95 points,or 0.2 per cent, to 18,200.22. The Nasdaq Composite Index dropped 0.6 per cent, the most in two weeks.

"Apple earnings were probably in line with expectations, but nevertheless are going to subtract from the S&P," said Bruce Bittles, chief investment strategist at Milwaukee-based Robert W Baird.

"The markets typically trade defensively in October before an election anyway, I expect more of the same. The market is going to go lower before it goes higher. It's going to require a springboard and that springboard requires slightly lower prices."

The S&P 500 hasn't climbed for more than two consecutive days for almost five weeks, unable to gain momentum during an earnings season dappled with disappointing forecasts from Intel Corp to 3M Co and Apple.

While 78 per cent of companies that have reported so far beat profit forecasts and 62 per cent exceeded revenue estimates, analysts still predict third-quarter income will be flat compared to a year ago.

Google parent Alphabet Inc and Amazon.com Inc are among those releasing results tomorrow.

Among shares moving on earnings news: Chipotle Mexican Grill Inc sank to a three-year low with quarterly results missing estimates as the company struggles to come back from an outbreak of foodborne illnesses last year.

Southwest Airlines Co dropped 8.1 per cent after predicting a revenue measure may worsen this quarter, a sign of diminished power to raise airfares.

Biogen Inc rallied 3.9 per cent after its quarterly profit topped estimates, with sales from a top-selling multiple-sclerosis drug jumping 10 per cent.

Mondelez International Inc rose 3.9 per cent after boosting its profit forecast, fueled by a push to reduce expenses by US$3 billion and higher product prices.

Northrop Grumman Corp climbed to a record, after raising its full-year earnings forecast as third-quarter results topped estimates.

Akamai Technologies Inc and Juniper Networks Inc surged more than 9 per cent after their profits beat estimates, offsetting some of Apple's drag on the technology group.

Huntington Bancshares Inc advanced 4.1 per cent to a four-month high after its quarterly results topped predictions, sending lenders in the S&P 500 toward a ten-month high.

Meanwhile, investors are assessing the likely trajectory of interest rates and the outcome of the the US presidential elections, with the next Federal Reserve meeting and the vote both due in the next two weeks.

Traders see a less than one-in-five chance the Fed will raise rates at its next meeting before the election. They are pricing in nearly 72 per cent odds of a December move.

A report today showed purchases of new-home sales n September stayed close to an almost nine-year high, showing residential real estate was maintaining momentum heading into the quieter selling season.

The S&P 500 is heading toward a third monthly decline and its worst since January. That goes against its historical trend - the benchmark has climbed 1.9 per cent on average in the past 25 Octobers, the biggest gain of any month.

It's trading at 18 times forecast earnings, the highest since 2009.

"The market is pretty directionless at the moment, chopping around in a range," said Michael Hewson, a market analyst at CMC Markets in London.

"Some investors are trimming down their portfolios ahead of next week's Fed announcement."

In Wednesday's trading, seven of the S&P 500's 11 main industries retreated, with real estate sinking 1.4 per cent while technology and health-care shares lost at least 0.6 per cent.

Financials and industrials increased more than 0.4 per cent. The CBOE Volatility Index rose 6.7 per cent toward a one-week high.

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