Weak results hurt tech stocks; dollar dips before Fed decision

Oil rally fades on US investory data as gold rises

NEW YORK, April 27, (Agencies): Disappointing results from Apple and Twitter hurt world technology stocks on Wednesday, while the US dollar weakened ahead of a policy announcement by the Federal Reserve, pushing oil prices to 2016 highs.

Apple shares slumped 7 percent in early trading after the company reported its first drop in iPhone sales and its first decline in revenue in more than a decade on Tuesday. Twitter tumbled more than 15 percent after first-quarter revenue lagged expectations.

The Nasdaq’s information technology sector fell 1.75 percent, with Facebook and Alphabet also lower.

Wall Street was lower in early trading ahead of the Fed decision.

The Dow Jones industrial average fell 62.18 points, or 0.35 percent, to 17,928.14, the S&P 500 lost 7.98 points, or 0.38 percent, to 2,083.72 and the Nasdaq Composite dropped 53.88 points, or 1.1 percent, to 4,834.41.

European shares eked small gains, with advances at sportswear group Adidas and British bank Barclays helping shake off a retreat in tech stocks. The pan-European FTSEurofirst 300 index rose 0.1 percent, while the euro zone’s blue-chip Euro STOXX 50 index advanced 0.2 percent.

A gauge of global equity markets fell 0.35 percent, with Japan’s Nikkei index and Chinese markets down around 0.4 percent.

The dollar fell 0.2 percent against a basket of currencies as investors waited for a Federal Reserve decision on US interest rates at 2 pm EST (1800 GMT).

The Fed is expected to leave rates unchanged as it continues to monitor the impact from weakening global growth, but some analysts said the central bank could alter its language to highlight reduced global risks.

“The markets are setting up for a pretty dovish statement after this Fed meeting,” said Chris Gaffney, president of EverBank World Markets in St. Louis. He said the risk of a hawkish tweak to the Fed’s language was limiting the greenback’s losses in the morning session.

The Australian dollar was the biggest mover among currencies, falling more than 2 percent to $0.7581 after data showed that core inflation unexpectedly slowed to its lowest on record in the first quarter.

The Aussie is on track for its biggest one-day fall in three months, reviving talk the Reserve Bank of Australia could cut the record-low 2 percent cash rate at its May policy meeting next week.

The dollar resumed its fall against the yen and euro , dipping 0.15 percent against the Japanese currency and 0.25 percent against the euro.

US

US stocks were off their lows in early afternoon trading on Wednesday as Apple pared some losses, ahead of a policy decision by the US Federal Reserve.

Apple’s shares were down 5.7 percent at $98.44. They had fallen as much as 8.3 percent after the company posted its first revenue decline in over a decade.

Gains in Boston Scientific, Boeing and Mondelez also helped limit the losses.

The Fed next meets on June 14-15. While the labor market continues to gain strength, inflation remains below the central bank’s 2 percent target and mixed economic data could cloud the path to future rate hikes.

At 12:08 p.m. ET (1608 GMT) the Dow Jones industrial average was up 18.77 points, or 0.1 percent, at 18,009.09, the S&P 500 was down 2.1 points, or 0.1 percent, at 2,089.6 and the Nasdaq Composite was down 39.00 points, or 0.8 percent, at 4,849.29.

Six of the 10 major S&P sectors were higher, with the energy index’s 1.11 percent rise leading the advancers.

Oil prices were higher, but still off 2016 highs, after the US government reported US crude stockpiles rose to a record high last week. Twitter slumped 15 percent to $15.08 after revenue missed expectations. The stock lost about $1.9 billion in value since Tuesday’s close.

Disappointing earnings have slowed down a recent rally but the S&P continues to hold near the record high it set almost a year ago. The index has rallied 15 percent since February.

First-quarter earnings from S&P 500 components are expected to have fallen 7.1 percent from a year earlier, according to Thomson Reuters I/B/E/S. Of the 166 companies that have reported, 59 percent reported revenue above analyst expectations, just short of the average 60 percent since 2002.

Europe

European shares edged higher on Wednesday helped by gains among utilities and energy stocks, while Greek equities lost ground after euro zone officials delayed a meeting on the country’s bailout.

Greece’s benchmark ATG equity index fell 2.8 percent, making it the worst-performing market in the region.

The Athens market fell after the Eurogroup said late on Tuesday that euro zone finance ministers would not meet on Thursday and needed more time to discuss two sets of Greek reforms that would unlock new loans.

The pan-European FTSEurofirst 300 index, which hit a three-month high last week, was up 0.3 percent by 1409 GMT.

The oil and gas index rose 2.3 percent, making it the biggest sectoral gainer, as crude oil prices hit their highest level for the year, driven by a falling dollar and evidence of declining US supply.

Utilities were also firmer with Germany’s E.ON, RWE up 4.7 percent and 7.9 percent respectively, reversing initial weakness after news that German utilities will be asked to pay 23.3 billion euros to cover the costs of nuclear waste storage. Traders in Frankfurt said that amount was better than some had feared.

France’s EDF rose 8 percent on news the French government had committed to unilaterally set a carbon price floor for electricity producers in a move analysts said would help EDF make more profits.

“This could allow EDF to get more profitable, as electricity prices should go up to reflect the carbon price”, said Xavier Caroen, analyst at Bryan Garnier.

Munich Re fell 3.5 percent after it warned that it expects to report a sharp drop in profits for the first three months of 2016 and its full-year target was now looking “ambitious”

Technology stock AMS also lost ground after Apple posted its first-ever decline in iPhone sales and its first revenue drop in 13 years. German sportswear group Adidas surged 8.6 percent after hiking its guidance for 2016 as it reported a 35 percent jump in first-quarter operating profit.

Asia

Apple’s suppliers were among the big losers in Asian markets Wednesday after it announced the first fall in iPhone sales, while overall trading was tentative before a Federal Reserve announcement later in the day.

US tech giant Apple said Tuesday that waning demand for its popular handset led to the first dip in revenue since 2003, and the trend was likely to continue this year as a growth slowdown in China drags on that crucial market. The news pummelled Apple’s shares in after-hours US trading, with the firm plummeting more than eight percent.

Apple’s results were “pretty disappointing”, said Angus Nicholson, a Melbournebased market analyst at IG.

It also hit Asian companies that provide parts for Apple gadgets. In Tokyo Japan Display was 0.5 percent down, Alps Electric shed more than one percent and Taiyo Yuden slid 0.8 percent.

“The sales drop forecast by Apple for the April-June period is greater than expected,” Nobuyuki Fujimoto, a senior market analyst at SBI Securities, told Bloomberg News.

“The shares of Japanese electronic-component makers are down by association.”

Taipei-listed Hon Hai Precision -- parent of assembler Foxconn, which builds the iPhone and iPad -- shed 0.9 percent and South Korea’s LG Display lost almost four percent. Regional stock markets were in the red before the Fed ends its two-day meeting on Wednesday, with dealers hoping for some guidance on its plans for monetary policy even though no major decisions are expected.

Hong Kong ended 0.2 percent down and Seoul gave up 0.2 percent.

Shanghai ended 0.4 percent lower, with early gains wiped out by a reading on Chinese industrial firms’ profits for March that lowered the chances authorities will add to their stimulus programme.

Wellington, Singapore and Taipei were also well down. Sydney shed 0.6 percent, reversing a morning rally.

Tokyo’s Nikkei ended down 0.4 percent a day before Japan’s central bank completes its own policy meeting, which is forecast to see a boost to its stimulus package after deadly earthquakes that led to the closure of several factories in the south.

Tokyo — Nikkei 225: DOWN 0.4 percent at 17,290.49 (close)

Shanghai — Composite: DOWN 0.4 percent at 2,953.67 (close)

Hong Kong — Hang Seng: DOWN 0.2 percent at 21,361.60 (close)

Oil

Oil prices rose Wednesday but an early-session rally faded as official data revealed a larger-than-expected increase in US crude inventories, reigniting concerns about a global supply glut.

Early in the session, West Texas Intermediate (WTI) reached $45.18 a barrel and Brent North Sea crude struck $47.05 -- the highest points since early November.

However approaching 1600 GMT, WTI for delivery in June was up only 23 cents at $44.27 a barrel after giving up most of the day’s gains.

Brent for June was 38 cents higher at $46.12 a barrel, compared with Tuesday’s close.

The US government’s Energy Information Administration on Wednesday said that commercial crude stockpiles jumped by two million barrels last week, slightly higher than analyst consensus expectations.

“Oil prices gave back early gains, turning red after the EIA reported a bigger-than-expected build... in crude oil inventories,” said Jasper Lawler, analyst at trading group CMC Markets.

“Earlier oil had reached the highest this year after the World Bank upgraded its 2016 oil price forecast to $41, attributing it to better sentiment and a weaker US dollar.

“Both Brent and WTI contracts remain up on the week,” Lawler added.

WTI and Brent had rallied also on Tuesday on speculation that Saudi Arabia plans to reduce drilling, fuelling hopes of an easing of the global supply glut.

A weaker US currency has also helped to improve demand for dollar-denominated crude.

Gold

Gold rose for a third straight session on Wednesday as weaker than expected US data weighed on the dollar ahead of the Federal Reserve’s monetary policy decision later in the day.

The Fed is likely to keep interest rates steady, with focus resting squarely on the tone of its statement and any hints on the timing of any future increases. The US central bank raised rates in December for the first time in nearly a decade.

“Overall, FOMC (Federal Open Market Committee) is probably not going to create a major reaction, data recently has definitely not supported any big change towards a more hawkish stance, which should help gold around current levels,” said Saxo Bank senior manager Ole Hansen. Spot gold was up 0.5 percent at $1,248.21 an ounce by 1434 GMT.

Data on Tuesday showed orders for long-lasting US manufactured goods rebounded far less than expected in March, suggesting that business spending and economic growth were weak in the first quarter. Another report showed an ebb in consumer confidence in April.