Wall St weighed by Boeing, J&J, ‘bleak’ Chinese economic data

Renault, Danone drove European shares lower

NEW YORK, Oct 19, (RTRS): Wall Street fell on Friday as negative headlines about Johnson & Johnson and Boeing and bleak economic data from China soured investor risk appetite, offsetting generally positive corporate earnings.

While the three major US stock averages were in negative territory, they were all on track to end the week higher.

Boeing Co and Johnson & Johnson shares led the blue-chip Dow’s decline.

Boeing dropped 4.8% after Reuters reported that text messages between two employees suggested the planemaker misled the Federal Aviation Administration about the safety of the grounded 737 MAX aircraft.

Johnson & Johnson announced it would recall baby powder in the United States after regulators found trace amounts of asbestos in a sample, sending its shares falling 5.6%.

Growth of China’s gross domestic product slowed to its weakest pace in nearly 30 years as the bruising trade war with the United States took its toll, stoking fears of slowdown contagion.

The International Monetary Fund has lowered its forecast for global growth this year to 3%, which would mark the slowest expansion since the financial crisis.

“Earnings have been coming in better than expected, but it doesn’t mesh with economic data that have been coming out recently, and the global growth forecasts,” said Robert Pavlik, chief investment strategist, senior portfolio manager at SlateStone Wealth LLC in New York. “That’s keeping some investors on the sideline.”

Third-quarter earnings season has hit full stride, with 73 companies in the S&P 500 having reported. Of those, 83.6% have come in above average estimates, according to Refinitiv data.

Still, analysts currently see S&P 500 earnings dropping by 3.1% compared with last year, which would mark the first contraction since the earnings recession that ended mid-2016.

Schlumberger NV gained 1.2% after the oilfield services company posted its largest quarterly loss ever as a result of a $12 billion charge as Chief Executive Olivier Le Peuch moved to shift focus toward software and services.

American Express Co reported betterthan-expected third-quarter profit as consumers boosted their spending. Still, the credit card issuers shares dipped 1.0%.

Coca-Cola Co’s revenue topped Street estimates as consumers took to zero-sugar sodas and smaller soft drink cans. The beverage maker’s upbeat forecast gave its shares a 2.1% boost.

Kansas City Southern jumped 5.9% after beating profit expectations on increased petroleum shipments to Mexico.

The Dow Jones Industrial Average fell 166.44 points, or 0.62%, to 26,859.44, the S&P 500 lost 7.53 points, or 0.25%, to 2,990.42 and the Nasdaq Composite dropped 59.67 points, or 0.73%, to 8,097.18.

Of the 11 major sectors in the S&P 500, six were in the red, with communications services and tech suffering the biggest percentage declines.

Real estate and financial sectors were the day’s biggest percentage winners.

Advancing issues outnumbered declining ones on the NYSE by a 1.01to-1 ratio; on Nasdaq, a 1.45-to-1 ratio favored decliners. The S&P 500 posted 27 new 52-week highs and 2 new lows; the Nasdaq Composite recorded 46 new highs and 47 new lows.

UK

London-listed stocks ended a mixed week on a cautious note ahead of a makeor-break parliamentary vote on Brexit, while InterContinental Hotels and oil stocks weighed on the FTSE 100, which closed 0.4% lower.

InterContinental shares fell 4.6% on Friday after the Holiday Inn owner said lower business bookings in China and protests in Hong Kong had caused a drop in revenue.

UK-focussed mid-caps outperformed the blue-chip index and the European benchmark, which was dragged lower by a sharp fall in French carmaker Renault.

The FTSE 250’s constituents earn most of their revenue in Britain and the index has risen more than 4% since last week as the prospects of a damaging “nodeal” Brexit have diminished.

“The bullish mood ... on the build up to the (Brexit) deal being brokered and announced, has now been replaced with a more cautious outlook,” CMC Markets’ David Madden said.

Traders eyed a vote on the new Brexit accord between Brussels and London, although analysts warned that progress made so far could be undone if lawmakers vote down the deal.

“It’s a recipe for investors to execute only the most necessary moves in advance, before a possible ‘manic Monday’ in Saturday’s wake,” said City Index analyst Ken Odeluga.

Paul O’Connor, head of the UK-based Multi-Asset Team at Janus Henderson, said markets will be very sensitive to the margin of victory if the deal is approved in Parliament.

“A big Tory win would probably boost UK assets... A narrow Conservative win could unsettle investors,” O’Connor said.

Outperforming the main index were some Brexit-sensitive stocks, including banks such as RBS and housebuilders , which saw volatile trading through the week.

Shares in consumer goods giants Unilever and Diageo lost about 1% each after downbeat earnings and forecast from their respective French peers Danone and Remy Cointreau and as sterling held steady. Cybersecurity firm Avast shone among mid-caps, jumping nearly 9% after its results.

Elegant Hotels, which operates hotels and restaurants in Barbados, soared 57% to 110 pence, the price per share offered by Marriott to buy the AIM-listed company.

Europe

Gloomy earnings reports from French carmaker Renault and food group Danone drove European shares lower on Friday, rounding off a tumultuous week that left investors waiting anxiously for the next twist in the Brexit saga.

The pan-European STOXX 600 index finished 0.3% lower and Paris-listed shares lagged the most with a 0.65% decline, hit by weak quarterly results.

Renault dropped 11.5% to become the biggest decliner on the STOXX 600, after the company cut its full-year revenue and profit forecast, the latest to suffer in an auto market downturn.

The warning pushed the wider auto and auto parts index to its biggest percentage drop in two-and-a-half weeks, with added pressure from Sweden’s Volvo AB forecasting a demand slump on both sides of the North Atlantic next year.

Volvo’s shares settled up 2.4% after falling as much as 5% as investors chose to focus on its forecast-beating earnings.