US: Stocks decline as energy slump, Fed overshadow Apple rally

[NEW YORK] US stocks fell, sending the Dow Jones Industrial Average to its biggest two-day loss in a year, as energy shares plunged and concern grew about international risks to the American economy and weakness in multinational earnings.

Energy companies slumped 3.9 per cent as a group after oil retreated. Apple Inc climbed 5.7 per cent after reporting a record US$18 billion in quarterly profit, one of the biggest in corporate history. Boeing Co advanced 5.4 per cent as it posted a quarterly profit that beat analysts' estimates.

The Standard & Poor's 500 Index fell 1.4 per cent to 2,002.16 at 4 pm in New York. The Dow Jones Industrial Average lost 195.84 points, or 1.1 per cent, to 17,191.37. The gauge fell 2.8 per cent over two days, the most since February 2014. The Nasdaq 100 Index dropped 0.6 per cent, erasing an earlier rally of 1.7 per cent. The Chicago Board Options Exchange Volatility Index, known as the VIX, added 19 per cent to 20.44, its biggest jump of the year.

"People smell no growth," Rick Fier, director of equity trading at Conifer Securities LLC in New York, said in an interview. "Currency problems are affecting revenues for multinationals. Greece is becoming a much bigger worry for the markets right now," he said. "Think about where the market would be today without Apple and Boeing." US stocks turned lower after the Fed boosted its assessment of the economy and downplayed low inflation readings while repeating a pledge to remain "patient" on raising interest rates. Losses accelerated in the final hour, pushing declines in the Dow and S&P 500 beyond 1 per cent and wiping out gains in the Nasdaq.

Fed officials are confronting divergent economic forces as they weigh the timing of the first interest-rate increase since 2006. Surprisingly strong job gains argue for tightening sooner, while inflation held down by a plunge in oil prices and a cooling global economy provides grounds for delay.

The Fed acknowledge global risks, saying that it will take into account readings on "international developments" as it decides how long to keep rates low.

"The Fed continued to emphasise that any rate hike decisions will be very data-dependent, which has been the norm for quite some time," Joe Bell, a Cincinnati-based senior equity analyst at Schaeffer's Investment Research Inc, said in a phone interview. "People are looking closely at earnings, which has been the story of the volatility in the past week or two. Oil and the strong US dollar are also creating a drag on large multinational companies." Greek Government U.S. futures pared early gains amid concerns over Greece's new government. New Prime Minister Alexis Tsipras named a cabinet yesterday that includes a foreign minister who raised questions over European Union sanctions against Russia and a finance minister who has called Greece's bailout a trap, while new ministers said they will cease the sale of some state assets and increase the minimum wage.

The S&P 500 has more than tripled from its March 2009 low, buoyed by three rounds of stimulus from the Fed. The index is down 4.2 per cent from an all-time high reached in December.

As the US has ended its bond-buying program, the European Central Bank is expanding its stimulus plan. The ECB announced last week it would spend 60 billion euros (US$68 billion) a month starting in March on purchases of debt to ward off the threat of deflation in the euro area.

Equities opened higher on Wednesday as Apple and Boeing rallied amid quarterly results, a day after benchmark indexes tumbled on concern that a stronger dollar is eroding profits at large companies.

Earnings Season While the dollar's climb is reducing profits at US companies from Procter & Gamble Co to Pfizer Inc and Microsoft Corp, more than 77 percent of Standard & Poor's 500 Index members have still beaten analysts' estimates so far this earnings season, according to data compiled by Bloomberg.

All 10 main industries in the S&P 500 fell.

Energy shares lost 3.9 per cent, the most in three weeks, after oil tumbled as US inventories rose to a three-decade high. Exxon Mobil Corp, Chevron Corp and Schlumberger Ltd fell at least 3.3 per cent.

Yahoo! Inc fell 3.2 per cent, erasing an earlier rally of 4.9 per cent. The company said Tuesday it will spin off its remaining stake in Alibaba Group Holding Ltd. The tax-free spinoff will place Yahoo's holding in the Chinese e-commerce company into a new firm called SpinCo.

Apple jumped 5.7 per cent. Net income surged 38 per cent, fueled by sales of larger-screened iPhones and refreshed Mac computers that Apple had unveiled in September, part of a barrage of new products from Chief Executive Officer Tim Cook as he sought to revitalize the company's revenue.

Boeing gained 5.4 per cent, the most since 2011, as it beat analysts' estimates and predicted it would make good in 2015 in converting a record jetliner-order backlog into cash. Investors have been waiting to see Boeing start generating more cash from its plane orders and stem losses on the 787 Dreamliner.

BLOOMBERG