The Morning Journal (Lorain, OH)
Investors monitor company earnings
Stocks had a muddled session on Tuesday, as investors worked through a large batch of corporate earnings.
NEW YORK >> Stocks had a muddled session on Tuesday, as investors worked through a large batch of corporate earnings from a range of companies including Gilead Sciences, McDonald’s and Texas Instruments.
McDonald’s shares had their biggest one-day percentage decline since the financial crisis, weighing heavily on the Dow Jones industrial average.
The Dow closed down 19.31 points, or 0.1 percent, to 18,473.75. The Standard & Poor’s 500 index was effectively flat, rising 0.7 of a point, or 0.03 percent, to 2,169.18 and the Nasdaq composite rose 12.42 points, or 0.2 percent, to 5,110.05.
The decline in the Dow was due to McDonald’s, which fell $5.69, or 4.5 percent, to $121.71. Because the Dow is price-weighted and McDonald’s is among the most expensive of the 30
stocks that make it up, the company’s shares have an outsized influence on the index.
McDonald’s reported disappointing growth in the U.S. Sales rose a meager 1.8 percent from a year ago, even with the restaurant chain rolling
out an all-day breakfast menu.
Wall Street is in the midst of its busiest week for corporate earnings, with 203 members of the S&P 500 reporting their results. So far, earnings have been better than what analysts had anticipated. Roughly 68 percent of all companies who have reported their results have beaten expectations, according to FactSet.
“You’ve seen better earnings, especially from companies that do a lot of business internationally,” said Kate Warne, investment strategist for Edward Jones. “It is part of what’s powered the market higher in July.”
In particular, this week is a big one for tech earnings. Apple and Twitter reported after the closing bell Tuesday and Google, Amazon and Facebook release their results later this week.
Apple shares jumped $3.68, or 4 percent, to $101.03 in aftermarket trading. While the company reported a 27 percent drop in quarterly earnings from a year earlier, the results still beat analysts’ expectations.
Twitter, however, plunged more than 10 percent in aftermarket trading after the company’s results missed expectations and the company cut its guidance for the year.
The market’s rally this month has given some investors pause. After an initial wobble in the days following Britain’s vote in late June to leave the European Union, the S&P 500 has surged 3.3 percent. Now the index is trading at 19 times expected earnings, which is historically high compared to the 14 to 16 times the index typically trades at.
“We have moved very far, very fast after the U.K. vote,” said David Lebovitz, a global market strategist at JP Morgan Asset Management. “We are going to need a bit of time to find the market’s new neutral spot after this run-up.”
The Federal Reserve started two-day policy meeting on Tuesday. Economists do not expect the nation’s central bank to raise interest rates from their current rate of 0.25 percent to 0.5 percent, but will be looking for any signals that policymakers are looking to raise rates later this year.