By Joseph Adinolfi and Sara Sjolin, MarketWatch
Earnings are mixed on Tuesday, while geopolitical tensions continue to weigh on equities
U.S. stocks traded firmly in negative territory on Tuesday, as a spate of tepid corporate earnings weighed on the broader market.
The Dow dropped 101 points, or 0.5%, to 20,535, while the S&P 500 index fell 7 points, or 0.3%, to 2,341, as health-care and financial shares led the broad-market gauge lower. The Nasdaq Composite Index lost 17 points, or 0.3%, to 5,839.
A drop in shares of Goldman Sachs Group Inc. (GS) shaved more than 60 points off the Dow Jones Industrial Average (http://www.marketwatch.com/story/goldman-sachss-stock-drops-after-profit-and-revenue-misses-expectations-2017-04-18) after the storied investment bank's first-quarter results fell short of Wall Street expectations (http://www.marketwatch.com/story/goldman-sachss-stock-drops-after-profit-and-revenue-misses-expectations-2017-04-18). Shares of Johnson & Johnson (JNJ), another Dow component, slid after the company reported a drop in sales that offset stronger-than-expected profits. (http://www.marketwatch.com/story/johnson-johnsons-stock-falls-after-sales-miss-offset-profit-beat-and-raised-outlook-2017-04-18)The two companies were the biggest losers on the Dow.
Netflix Inc. (NFLX)shares turned lower, rattled by worries about the company's ability to attract and retain new users. The firm reported late Tuesday that it had added fewer subscribers than expected during the first quarter. (http://www.marketwatch.com/story/netflix-shares-fall-after-streaming-company-adds-fewer-subscribers-than-expected-in-q1-2017-04-17)
Overall, the tone of Tuesday's batch of corporate reports was generally weak, said Kim Forrest, senior analyst and portfolio manager at Fort Pitt Capital.
"The misses weren't huge, but they didn't quite make analysts' mark," Forrest said.
Market participants have been looking to corporate earnings to justify a multimonth rally in equities that had taken stock benchmarks to records as recently as March 1, but has since stalled as doubts about valuations and concerns President Donald Trump's ability to quickly implement pro-growth policies has weighed on sentiment.
News out of the U.K. also helped drive the U.S. market lower, said Jack Ablin, chief investment officer at BMO Private Bank. as British Prime Minister Theresa May called for a snap general election (http://www.marketwatch.com/story/pound-rises-as-theresa-may-calls-for-new-uk-election-2017-04-18) that she said would be necessary to strengthen her hand during negotiations with the European Union as the country exists the European trade bloc.
Treasury Secretary Steven Mnuchin, meanwhile, told the Financial Times that the Trump administration hadn't taken the controversial border-adjusted tax off the table, which also helped ding stocks, according to Art Hogan, chief market strategist at Wunderlich Securities. The controversial provision would likely hurt import-dependent industries like retailers.
A recent batch of lackluster U.S. economic data, including disappointing March jobs report (http://www.marketwatch.com/story/us-creates-98000-jobs-in-march-2017-04-07-81033623), have helped weigh on markets in recent weeks, as have escalating tensions between the U.S. and several of its geopolitical rivals. Karyn Cavanaugh, market strategist at Voya Investment Management said she expects shares to languish until a clearer picture of quarterly earnings emerges.
"The data, coupled with the geopolitical risk out there are making investors say 'show me what you've got'-- they want to see the earnings," Cavanaugh said.
Tensions between the U.S. and North Korea have escalated since the U.S. earlier this month ordered a Navy strike fleet to the waters off the Korean Peninsula. President Donald Trump said Monday that the government in Pyongyang has "gotta behave." In response, a senior North Korean official said his country was "ready to react to any mode of war desired by the U.S."
U.S. stocks finished higher on Monday, halting a three-session losing run (http://www.marketwatch.com/story/us-stock-futures-hint-of-lower-start-as-geopolitical-economic-worries-weigh-2017-04-17).
Read:Jack Bogle on how to invest in a time of Trump: 'Be realistic' (http://www.marketwatch.com/story/jack-bogle-on-how-to-invest-in-a-time-of-trump-be-realistic-2017-04-13)
Earnings deluge:Bank of America Corp. (BAC) and UnitedHealth Group Inc.(UNH) were the two standouts of Tuesday's batch of earnings, with both firms seeing their shares rise after beating expectations.
Other companies that reported on Tuesday include Harley-Davidson Inc.(HOG) and Charles Schwab Corp.(SCHW).
Bank earnings have been mixed so far this quarter, with strong reports by J.P. Morgan Chase & Co. (JPM) and Citigroup Inc. (C) offset by weakness at Goldman and Wells Fargo & Co (http://www.marketwatch.com/story/wells-fargo-high-costs-weak-mortgages-weigh-in-q1-2017-04-13).(WFC)
Stock movers: Shares of United Continental Holdings Inc.(UAL) rose after the United Airlines's parent company late Monday reported adjusted earnings that beat expectations (http://www.marketwatch.com/story/united-shares-higher-after-earnings-beat-ceo-calls-flight-3411-incident-humbling-2017-04-17).
United CEO Oscar Munoz said in the earnings statement that the incident of a passenger being forcibly removed from a plane was a "humbling experience."
Meanwhile, shares of Cardinal Health Inc. (CAH) tumbled after the company struck a deal to buy part of Medtronic PLC's (MDT)patient monitoring and recovery unit. (https://www.wsj.com/articles/cardinal-healths-6-1-billion-deal-for-some-medtronic-operations-raises-debt-concerns-1492520887)
Post Holdings Inc.(POST) shares edged higher after the packaged food company said it is buying iconic U.K. breakfast brand Weetabix Food Co. for GBP1.4 billion ($1.76 billion) (http://www.marketwatch.com/story/post-holdings-agrees-to-buy-weetabix-in-176-billion-deal-2017-04-18).
Economic news and Fed speakers:Manufacturing output fell in March for the first time since last August, (http://www.marketwatch.com/story/industrial-output-rises-05-in-march-due-to-demand-for-heating-2017-04-18) according to a batch of industrial-production data released Tuesday. Also, a readingon housing starts, which measure the number of new-home construction projects that broke ground during a given month, was slightly weaker than expected in March.
Kansas City Federal Reserve President Esther George, speaking at Bard College Tuesday morning, said the central bank should begin reducing its balance sheet this year, echoing remarks by other Fed officials, including New York Fed President William Dudley.
Other markets: The British pound rallied after May's announcement about the snap election (http://www.marketwatch.com/story/pound-rises-as-theresa-may-calls-for-new-uk-election-2017-04-18).
Tuesday's selling apparently wasn't strong enough to drive up demand for haven assets like gold , which was headed lower, as were other precious and industrial metals.
A key gauge of the dollar's strength, the ICE U.S. Dollar Index fell after May's announcement as the euro and British pound rallied.
Stocks in Asia closed mixed (http://www.marketwatch.com/story/asian-markets-off-to-slow-start-after-holiday-weekend-2017-04-17), with Japan's Nikkei 225 index ending higher, but Chinese markets falling.
Oil prices (http://www.marketwatch.com/story/oil-steady-as-market-takes-wait-and-see-approach-2017-04-18) declined (http://www.marketwatch.com/story/oil-steady-as-market-takes-wait-and-see-approach-2017-04-18), adding to Monday's downdraft.
(END) Dow Jones Newswires
April 18, 2017 11:14 ET (15:14 GMT)
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