Late skid leaves U.S. stocks mostly lower; Apple climbs
NEW YORK » A late slump left U.S. stocks mostly lower on Wednesday as investors appeared to grow more concerned about the possibility of rising interest rates. Apple climbed after a solid quarterly report and a forecast for strong iPhone sales.
Brewer Molson Coors suffered its biggest one-day loss in 13 years after it said the U.S. beer industry got off to a slow start in 2018. Weak results from drugmaker Gilead Sciences and animal health company Zoetis weighed on health care companies. Smaller companies fared better. Apple did a bit better than Wall Street expected in its latest quarter and forecast better sales than investors feared. The tech giant also said it will spend some of its tax savings on a $100 billion stock repurchase.
The Federal Reserve left interest rates unchanged, as investors and analysts expected, and said it expects to keep raising interest rates gradually. The central bank said inflation has approached its 2 percent target, but it didn’t suggest it is overly concerned that inflation will strengthen more than that. Major indexes sold off in the last hour of trading. Steve Wood, chief market strategist at Russell Investments, said investors believe the Fed doesn’t expect to do much to prop up the economy.
“The Fed views the economy as having improved and inflation has returned to normal,” he said. “That environment, in the Fed’s opinion, no longer justifies overly accommodative monetary policy.”
One of the key debates on Wall Street is whether the Fed will raise rates three times as planned, or if it will raise them four times in response to more signs of inflation and faster economic growth. That question wasn’t answered Wednesday and Wood said he thinks a fourth increase is possible.
The S&P 500 index fell 19.13 points, or 0.7 percent, to 2,635.67. The Dow Jones industrial average lost 174.07 points, or 0.7 percent, to 23,924.98. The Nasdaq composite slid 29.81 points, or 0.4 percent, to 7,100.90.
The Russell 2000 index of smaller-company stocks added 4.58 points, or 0.3 percent, to 1,554.92 as smaller technology companies and retailers advanced.
After months of concerns on Wall Street about weak iPhone sales, Apple had a slightly better fiscal second quarter than expected and investors were pleased with its projections for the current quarter as well. It’s also giving its shareholders a lot of cash. Apple bought back almost $23 billion in stock in the first three months of the year and will spend another $100 billion on stock repurchases. It’s also raising its dividend.
The Republican-backed tax package temporarily lowered the taxes that companies pay when they bring cash stashed overseas back to the U.S., which encouraged companies like Apple to bring that cash back to the U.S. Apple stock climbed 4.4 percent to $176.57.
The bond market had little reaction to the Fed’s statement and bond prices were little changed. The yield on the 10-year Treasury note remained at 2.97 percent. The dollar weakened and fell to 109.73 yen from 109.81 yen. The euro fell to $1.1988 from $1.1993.
Molson Coors Brewing said cold weather may have prompted consumers to cut back on their drinking. The company’s results fell short of analyst projections and it also said sales to wholesalers declined. Its stock shed 15.4 percent to $60.64. Coca-Cola and Pepsi continued to fall, with Coke down 1.2 percent to $42.06 and Pepsi sliding 1.9 percent to $97.23.
Xerox’s CEO and most of its board will resign as investors Carl Icahn and Darwin Deason push the company to stop its sale to longtime partner Fujifilm. The duo called for Jacobson to resign in late January, shortly before Xerox announced a deal that will result in Fujifilm taking majority control of Xerox. Jacobson and five other directors are being replaced. Xerox said the new board will reconsider the deal with Fujifilm and could terminate or restructure Xerox’s relationship with the company.
Xerox shares fell 9 percent to $29.38. Snap skidded 21.9 percent to $11.03 after its first-quarter revenue fell far short of estimates. The company said its redesign, which some users have slammed, was one of the reasons for the slip.
After posting its highest growth in a decade during 2017, economic growth in the 19-country eurozone slowed a bit in the first quarter, largely because of temporary factors such as cold weather. Despite the slowdown, growth was higher than the equivalent in the U.S.