Wall St. reverses course as discretionary, industrials weigh


October 27, 2016/Reuters

By Yashaswini Swamynathan

U.S. stocks reversed course late Thursday morning as weak results from several industrial and consumer discretionary companies eclipsed gains from healthcare stocks.

The top drag on the S&P 500 and the Nasdaq was Comcast (CMCSA.O), which fell 2.7 percent following price target cuts from Barclays and Deutsche Bank, citing increased competition from AT&T-owned DirecTV Now.

Comcast, along with Ford (F.N), whose quarterly net income fell by more than 50 percent, were chiefly responsible for the consumer discretionary index .SPLRCD to fall 0.77 percent.

Profits at S&P 500 companies have largely exceeded analysts’ estimates for the third quarter so far, setting up for the first profit growth since the second quarter of 2015.

“This is a pretty important quarter because we are expecting an inflection to put that earnings recession in the rear-view mirror and we’re going to have positive earnings growth … Still it is not very robust,” said Michael Scanlon, managing director of Manulife Asset Management.

Overall earnings for the S&P 500 companies in the latest quarter are expected to rise 2.2 percent, according to Thomson Reuters I/B/E/S.

Industrials .SPLRCI fell 0.67 percent, pulled down by Boeing (BA.N), which rallied on Wednesday, and GE (GE.N).

At 11:16 a.m. ET, the Dow Jones industrial average .DJI was down 1.98 points, or 0.01 percent, at 18,197.35 The S&P 500 .SPX was down 2.91 points, or 0.14 percent, at 2,136.52 and the Nasdaq Composite .IXIC was down 13.62 points, or 0.26 percent, at 5,236.65.

Seven of the 11 major S&P sectors were lower, with the newly minted real estate index .SPLRCR falling 2.52 percent mainly due to a 3.4 percent fall in Simon Property (SPG.N), which reported results on Wednesday.

Google parent Alphabet (GOOGL.O) was down 0.7 percent, while online retailer Amazon.com (AMZN.O) was off 0.4 percent. The two companies are scheduled to report after markets close on Thursday.

“I think it’s just a bit of folks sitting on their hands as we wait for big earnings reports coming out tonight,” Scanlon said.

Gains in Bristol-Myers (BMY.N) and Celgene (CELG.O), following strong results, kept the healthcare sector .SPXHC positive.

Investors also took Qualcomm’s (QCOM.O) deal to buy NXP Semiconductors (NXPI.O) for an enterprise value of $47 billion as a sign of confidence in the U.S. equity market.

NXP’s shares rose 1.44 percent, while Qualcomm was the top stock on the S&P at 3.1 percent higher. Stocks of other chipmakers including Micron Tech (MU.O) were also higher.

Tesla (TSLA.O) rose 4.1 percent after the electric carmaker reported its first quarterly net profit in more than three years.

Declining issues outnumbered advancing ones on the NYSE by 1,928 to 892. On the Nasdaq, 1,483 issues fell and 1,100 advanced.

The S&P 500 index showed 13 new 52-week highs and eight new lows, while the Nasdaq recorded 53 new highs and 56 new lows.

(Reporting by Yashaswini Swamynathan in Bengaluru; Editing by Don Sebastian)


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