Weak earnings reports send stocks downward
U.S. stocks fell NEW YORK — Tuesday after weak first-quarter reports from Johnson & Johnson and Goldman Sachs frustrated investors. Health care companies lost the most.
Wall Street has high hopes for company earnings this spring, and weak results from the world’s largest health care products company and one of the biggest financial firms had them concerned. Johnson & Johnson took its biggest oneday loss in a year. Investors also looked for safety after the British government called for a surprise early election next month. Bond prices and the pound rose and European stock indexes tumbled.
Kate Warne, an investment strategist for Edward Jones, said Goldman Sachs and Johnson & Johnson had a dramatic effect on stocks because investors expect a very strong round of company earnings reports this month. According to S&P Global Markets Intelligence, investors expect first-quarter earnings for S&P 500 companies to rise almost 10 percent compared to last year. That would be the biggest jump since 2014.
“The reason it’s so important is that the stronger growth is likely to support higher stock prices even in the absence of pro-growth policies from the Trump administration,” she said.
The Standard & Poor’s 500 index shed 6.82 points, or 0.3 percent, to 2,342.19. The Dow Jones industrial average lost 113.64 points, or 0.6 percent, to 20,523.28. Goldman Sachs was responsible for most of that loss.
The Nasdaq composite fell 7.32 points, or 0.1 percent, to 5,849.47. The Russell 2000 index of small-company stocks recovered from an early loss and rose 0.72 points, close to 0.1 percent, to 1,361.89.
On Monday stocks made their biggest gain in six weeks. But over the last few weeks they’ve mostly drifted lower while bond yields have fallen to five-month lows.
Johnson & Johnson stumbled after investors were disappointed with its sales. Revenue from its biggest-selling drug, the Crohn’s disease treatment Remicade, fell 6 percent. Meanwhile growth for many consumer health products slowed, and payers demanded bigger rebates on treatments for cardiovascular ailments, diabetes, and primary care products.
The maker of Tylenol and Band-Aids lost $3.90, or 3.1 percent, to $121.82.
Prescription drug distributor Cardinal Health also dropped after it gave weak profit forecasts for this year and next as drug prices continue to fall. It will also pay $6.1 billion to buy a group of businesses from medical device maker Medtronic. Cardinal Health sank $9.44, or 11.5 percent, to $72.39. Competitors AmerisourceBergen and McKesson each fell about 5 percent.