US stocks fell, with the S&P 500 posting the worst two-day drop since February, amid lacklustre earnings and few signs of a pick-up in economic growth.
Equities rebounded sharply in the final hour of trading, with the major indexes cutting their worst losses by more than half. Corporate reports jostled stocks, as Gilead Sciences Inc. retreated 9.1 per cent, the biggest drag on the benchmark after its profit missed estimates.
Apple Inc. slumped for a seventh session a day after Carl Icahn said he cashed out his stake in the company. Amazon.com Inc. surged 9.6 per cent after posting better-than-estimated results.
The S&P 500 declined 0.5 per cent to 2,065.30 at 4 p.m. in New York, eking out a 0.3 per cent gain for the month while losing 1.3 per cent this week, the most since February. The Dow Jones Industrial Average fell 57.12 points, or 0.3 per cent, to 17,773.64. The Nasdaq Composite Index slid 0.6 per cent.
“A lot of optimism came into the market last week as we crossed 2,100, which makes it vulnerable to a short-term pullback, and that’s what we’re getting right now,” said Bruce Bittles, chief investment strategist at Milwaukee-based Robert W. Baird, which oversees $110 billion. “The weakness that developed yesterday and today has stemmed from weak earnings. The market is being supported by very favourable monetary policy, but valuations are very stretched and earnings aren’t coming through.”
As policy makers and investors assess the health of the world’s biggest economy, a report today added to concerns growth is struggling to gain traction. Consumer spending rose less than forecast in March, wrapping up the weakest quarter in a year for the biggest part of the U.S. economy even as incomes accelerated. Faster wage growth may be needed to help encourage American consumers to spend more freely and jump start an economy coming off its weakest performance in two years.
A separate measure showed consumer confidence fell to a seven-month low in April as Americans’ expectations about economic growth dropped to the lowest point since September 2014. Trader bets for a Federal Reserve interest-rate rise in June have fallen to 14 per cent from 20 per cent a week ago, while the first meeting with at least even odds for an increase has been pushed back a month to December.
Energy producers were the strongest April performers in the S&P 500, tracking crude to a five-month high. The group rose 8.7 per cent in the month, while raw-materials advanced 4.9 per cent. Technology stocks have been battered by a batch of weaker-than-forecast earnings from heavyweights such as Apple, Microsoft Corp. and Google parent Alphabet Inc. The group fell 5.5 per cent for the worst month since August.
Rally Stumbles
The benchmark equity index had rebounded as much as 15 percent from a 22-month low in February, though the rally faltered this week amid corporate earnings disappointments. The gauge reached a four-month high on April 20, within 1 per cent of a record set last May.
More than half of S&P 500 members have reported earnings this season, with 77 per cent beating profit forecasts and 57 per cent exceeding sales expectations. Analysts still project a 8.2 per cent decline in first-quarter profit for the index’s companies, compared with forecasts for flat growth at the start of the year.
“Even with the better numbers you’ve had from Facebook and Amazon, that’s not going to help the rest of the market,” said Michael James, managing director of equity trading at Wedbush Securities Inc. in Los Angeles. “We have to consolidate a little bit. We’re seeing a point where the market’s at a potential brink to break down just a touch.”
Health-Care Slides
In Friday’s trading, seven of the S&P 500’s 10 main industries declined, as health-care companies slipped 1.5 percent, while financial and technology stocks lost at least 0.6 per cent. Consumer discretionary companies rose 0.5 per cent, buoyed by Amazon and Expedia Inc.’s biggest jump in 10 weeks after it topped profit estimates.
The CBOE Volatility Index increased 3.2 per cent to 15.7, a three-week high. The measure of market turbulence known as the VIX has climbed 14 per cent in two sessions, giving it the biggest monthly gain since December.
Gilead Sciences dropped 9.1 per cent, the steepest in 16 months. The decline pushed the Nasdaq Biotechnology Index lower by 2.6 per cent for a fifth day of losses and its longest losing streak since January.
All but 10 shares in the 69-members S&P 500 technology index declined. Semiconductors fell, led by a 2.7 per cent loss for Intel Corp. All of the 30 companies in the Philadelphia Stock Exchange Semiconductor Index decreased, with Skyworks Solutions Inc. and Micron Technology Inc. sliding at least 6.9 per cent.
Data storage companies Seagate Technology Plc and Western Digital Corp. slumped more than 11 per cent after reporting results and giving outlooks that fell short of analysts’ estimates.
Airlines Tumble
Airlines tumbled, with a Bloomberg index of U.S. carriers mired in its longest downturn since 2012. The gauge lost 12 per cent in April for the worst monthly decline since July 2011.
Amazon rose 9.6 per cent, the most since July. The company’s sales and profit topped estimates on robust demand for quick-turnaround delivery, cloud services and gadgets like the Kindle and Echo.
Ford Motor Co. and General Motors Co. lost at least 2 per cent. Data today showed consumer spending in March was held back by less demand for motor vehicles. Wal-Mart Stores Inc. lost 3 per cent, the most on a closing basis since October.
Among others moving on corporate news, Stericycle Inc. plunged 22 per cent to a three-year low after its earnings missed estimates and the medical waste management provider cut it outlook. Monster Beverage Corp. soared 13 per cent, the most in the S&P 500 Friday.
The shares rose to a three-month high after first-quarter profit topped analysts’ estimates, helped by a distribution deal with Coca-Cola Co. that’s boosting sales.
News by Bloomberg, edited by ESM. To subscribe to ESM: The European Supermarket Magazine, click here.
