S&P 500 Dips Early Thursday 04/25 09:24
Disappointingly weak earnings reports from 3M and other industrial companies
kept U.S. stock indexes in check on Thursday, blotting out a set of blowout
results from big-name tech companies.
NEW YORK (AP) -- Disappointingly weak earnings reports from 3M and other
industrial companies kept U.S. stock indexes in check on Thursday, blotting out
a set of blowout results from big-name tech companies.
3M, the maker of Scotch tape and various products for businesses, reported
weaker revenue and profit than Wall Street expected for the first three months
of the year. It also slashed its profit forecast for the full year, while
United Parcel Service said its net income fell 17% on nearly flat revenue.
They helped drag industrial stocks to the largest loss among the 11 sectors
that make up the S&P 500, and 3M's loss dealt a particularly sharp blow to the
Dow Jones Industrial Average.
The Nasdaq held up better than the other indexes following strong earnings
reports from Microsoft and Facebook.
Tech companies have been leading the way this year, as the S&P 500 index
returned to a record this week, on expectations that they can continue to
deliver strong growth despite a slowing global economy. And many are
delivering: Revenue jumped 14% for Microsoft and 26% for Facebook from a year
Earnings reporting season is about a third of the way in, and investors are
searching for clues about whether profit growth can accelerate later this year
following a weak first quarter. The stock market has had a furious rally this
year, largely because the Federal Reserve has said that it is halting its plan
to raise interest rates, at least temporarily.
KEEPING SCORE: The S&P 500 was down 0.4% as of 10:15 a.m. Eastern time.
The Dow Jones Industrial average was down 247 points, or 0.9%, at 26,348,
and the Nasdaq composite slipped 0.2%.
EARNINGS WOES: 3M plunged 9.7%, and UPS lost 7.2% following their earnings
They helped to drag industrial stocks in the S&P 500 down by 1.7%.
EARNINGS WINS: Facebook surged 6.5% following its earnings report, and it
helped communications-services companies in the S&P 500 jump 1.3% for the
biggest gain among the 11 sectors that make up the index.
Microsoft rose 4%, and technology companies in the S&P 500 rose 0.5%.
THE POWER OF LOW EXPECTATIONS: Coming into this earnings reporting season,
Wall Street was expecting a dud. Partially because of slowing economic growth
around the world, analysts were forecasting the first drop in earnings for the
S&P 500 in nearly three years.
Companies, though, have been surprising analysts with not-as-bad results. So
far, about 190 of the companies in the S&P 500 have reported their earnings for
the first three months of the year. Among them, earnings actually grew 2.1%
from a year earlier.
All the better-than-expected results mean analysts are now forecasting a
drop of 2.8% in earnings for S&P 500 companies this reporting season. That's
not as bad as the 4% decline they were expecting a few weeks ago.
MARKETS ABROAD: European stocks struggled following news that two potential
mergers won't be going ahead. In the U.K., regulators blocked Sainsbury's 7.3
billion-pound ($9.4 billion) purchase of Walmart's Asda unit amid concerns the
deal would have increased prices and reduced the quality and range of products
And in Germany, Deutsche Bank and Commerzbank said they were halting talks
on a possible merger that aimed to create a stronger global banking player,
saying it would be too risky and costly.
Germany's DAX slipped 0.2%, Britain's FTSE 100 lost 0.6% and France's CAC 40
index fell 0.4%.
In China, the Shanghai market dropped 2.4% amid signs the country's central
bank plans to avoid major stimulus moves amid signs the economy is stabilizing.
State media reported that the People's Bank of China's latest injection of
liquidity showed the use of target support rather than what the Xinhua News
Agency described as a "scattergun approach."
In Japan, the Nikkei 225 rose 0.5%, and South Korea's Kospi lost 0.5%.