Stocks fall amid drop in earnings forecasts
U.S. stocks sank Wednesday, pulling indexes further below record highs hit earlier in the week. The drop was modest but broad: nine of the 10 sectors in the Standard & Poor’s 500 index lost ground.
Given the market’s recent run, it’s only natural for investors to turn cautious, said Terry Sandven, senior equity strategist at U.S. Bank Wealth Management. On Monday, the S&P 500 reached an all-time high while the Nasdaq crossed the 5,000 mark for the first time in nearly 15 years.
“We’re in wait-and-see mode,” Sandven said. “Prices are definitely stretched, especially when earnings expectations are being set lower.”
The S&P 500 gave up 9.25 points, or 0.4%, to 2,098.53.
The Dow Jones industrial average lost 106.47 points, or 0.6%, to 18,096.90. The Nasdaq composite fell 12.76 points, or 0.3%, to 4,967.14.
Alcoa’s stock sank 4% following news that analysts at Bank of America cut their ratings on the aluminum giant. BofA’s analysts expect prices for aluminum to lose strength as China increases its exports. Alcoa lost 59 cents to $14.59.
Abercrombie & Fitch posted quarterly profit that beat analysts’ estimates but its sales fell short. A top executive at the retailer warned that it would probably face trouble from a stronger dollar. Abercrombie’s stock plunged $3.72, or 16%, to $20.27.
With all but 12 big companies in the S&P 500 having turned in their fourth-quarter results, overall earnings are on track to increase 7.7%, according to S&P Capital IQ. That’s much better than some had feared.
Forecasts for the first three months, however, have been slashed. In early December, analysts projected an 8.6% increase in corporate earnings for the first quarter. Now, they expect them to shrink 2.6%.
In Europe, France’s CAC-40 index and Germany’s DAX each gained 1%. Britain’s FTSE 100 picked up 0.4%.
In the market for U.S. government bonds, the yield on the 10-year Treasury note held steady at 2.12%.
Most precious and industrial metals traded lower. Gold fell $3.50 to settle at $1,200.90 an ounce, and silver slipped 14 cents to $16.16 an ounce.