Credit: Shutterstock photoBenchmarks slipped for the second consecutive day on Tuesday affected by dismal economic data, decline in crude prices and mixed earnings numbers. The modest decline in markets came ahead of the Fed statement today. Though Dow tried to move to the green banking on gains in Boeing, selloff in IBM's shares kept it in the negative zone. Meanwhile, decline in oil prices kept S&P 500 in the red. Apple's shares ended lower, dragging the Nasdaq lower. However, the iPhone maker came out with promising results after the closing bells.
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The Dow Jones Industrial Average (DJI) declined 0.2% to close at 17,581.43. The Standard & Poor's 500 (S&P 500) lost 0.3% to close at 2,065.89. The tech-laden Nasdaq Composite Index closed at 5,030.15, losing nearly 0.1%. Meanwhile, the fear-gauge CBOE Volatility Index (VIX) edged up nearly 1% to settle at 15.43. A total of around 7.3 billion shares were traded on Tuesday, just higher than the last 20-sessions' average of 7.2 billion. Decliners outpaced advancing stocks on the NYSE. For 72% stocks that declined, 25% advanced.
Ahead of the Fed statement today, economic reports came out on a dismal note yesterday. Durable goods orders dropped for the second straight month and consumer confidence also declined. Fed's two-day policy meeting began on Tuesday and a statement will be delivered today. Investors will look for clues about the timing of a rate hike and if the central bank's assessment of the economic picture will hint at a lift off in December.
Coming back to the economic data, the U.S. Census Bureau reported new orders for manufactured durable goods dropped by 1.2% to $231.1 billion in September. This is the second consecutive month of decline, after it had dropped by 3% in August. The drop in durable goods order was narrower than the consensus estimate of a 1.6% decline.
Separately, the Conference Board reported that Consumer Confidence Index dropped to 97.6 in October from 102.6 in September. This decline follows modest gain in September. The decline was also sharply lower than consensus estimate of 102.4. Lynn Franco, Director of Economic Indicators at The Conference Board, said: "Consumers were less positive in their assessment of present-day conditions, in particular the job market, and were moderately less optimistic about the short-term outlook".
However, data on S&P/Case-Shiller Home Price Indices revealed continued gain in home prices across the US over the last 12 months. According to the report from S&P Dow Jones Indices, S&P/Case-Shiller 20-City Composite gained 5.1% year on year in August, improving from July's 4.9% year-on-year increase. The 10-City Composite also reported annual gains of 4.7% in August.
Apart from the economic data, mixed earnings results also withheld the benchmarks from moving to the green. Among major names, Ford Motor Co.'s ( F ) shares plunged over 5% after reporting third quarter results. The decline came despite adjusted earnings per share of 45 cents were in line with estimates, and revenues beat expectations. United Parcel Service, Inc. ( UPS ) also dropped nearly 3% after revenues declined 0.4% from the year-ago quarter to $14.2 billion and missed the Zacks Consensus Estimate of $14.35 billion. However, earnings of $1.39 per share beat the Zacks Consensus Estimate by 2 cents.
JetBlue Airways Corporation ( JBLU ) slumped 3.2% after its passenger revenue per available seat mile declined 0.6% year on year. However, the company had posted over two times jump in quarterly profit. The decline in JetBlue's shares was a major reason for the 2.6% drop in Dow Jones Transportation Average.
Among the gainers, Alibaba Group Holding Limited ( BABA ) and Coach, Inc. ( COH ) both reported encouraging results and their shares jumped 4.1% and 4.4%, respectively. Alibaba beat both the top and bottom line estimates, while its sales jumped 32%. Meanwhile, Coach reported seventh straight quarter of earnings beat and revenues also surpassed estimates. However, earnings per share plunged 22.6% from the year-ago quarter figure, hurt by a fall in net sales and subdued margin performance.
Meanwhile, Health Care Select Sector SPDR ETF (XLV) was the best performing S&P 500 sector after gaining 1.8%. The healthcare sector was driven higher by better-than-expected earnings from key pharma companies Merck & Co. Inc. ( MRK ) and Pfizer Inc. ( PFE ).
Merck's earnings of 96 cents per share beat the Zacks Consensus Estimate of 91 cents and increased 6.7% year on year. However revenues missed estimates and dropped 4.6% from the year-ago quarter. The company also raised earnings guidance to $3.55 - $3.60 per share from the prior $3.45 - $3.55 per share. Revenues were also guided up to $39.2 billion - $39.8 billion from $38.6 billion - $39.8 billion. Merck's shares gained 1.6%.
Pfizer's shares were up 2.4% after reporting third quarter 2015 earnings of 60 cents per share, beating the Zacks Consensus Estimate of 51 cents. Revenues slipped 2% but were ahead of the estimates. Moreover, Pfizer raised its guidance again and now expects 2015 earnings of $2.16 - $2.20 per share on revenues of $47.5 billion - $48.5 billion.
Healthcare sector was also boosted after shares of Rite Aid Corporation ( RAD ) soared 42.6%. The gains came on reports that indicated Walgreens Boots Alliance ( WBA ) is nearing a takeover of the company. The Wall Street Journal reported that the acquisition may be announced today.
Markets were also affected by the decline in crude prices. Price of WTI Crude Oil declined 1.8% to $43.20 and Brent Crude Oil was down 1.6% to $46.81. This dragged the energy stocks lower and Energy Select Sector SPDR Fund (XLE) was the biggest loser among the S&P 500 sectors. Key energy stocks such as Chevron Corporation ( CVX ), Kinder Morgan, Inc. ( KMI ), ConocoPhillips ( COP ) and Occidental Petroleum Corporation ( OXY ) dropped 1.2%, 1%, 2.4% and 2%, respectively.
While declines in oil prices affected the S&P 500, decline of over 4% in International Business Machines Corporation ( IBM ) weighed on the Dow. IBM said that the Securities and Exchange Commission is conducting investigation related to its accounting treatment of certain transactions in the U.S., U.K. and Ireland. While IBM was a drag, E. I. du Pont de Nemours and Company's ( DD ) shares jumped 2.8% and was a major gainer. DuPont beat earnings expectations in the third quarter of 2015, but saw its revenues and profits tumble.
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RITE AID CORP (RAD): Free Stock Analysis Report
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
