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Stocks are having their fourth down day in five sessions as weak earnings and geopolitical jitters weigh on sentiment.
U.S. stocks on Tuesday finished squarely in negative territory, but off session lows, as a spate of tepid corporate earnings weighed on the broader market.
The Dow Jones Industrial Average DJIA, -0.55% dropped 113.64 points, or 0.6%, to close at 20,523.28, while the S&P 500 index SPX, -0.29% fell 6.82 points, or 0.3%, to end at 2,342.19, as health-care, energy and financial shares led the broad-market gauge lower. The Nasdaq Composite Index COMP, -0.12% lost 7.32 points, or 0.1%, to close at 5,849.47.
A decline in shares of Goldman Sachs Group Inc. GS, -4.72% shaved more than 70 points off the Dow industrials after the investment bank’s first-quarter results missed Wall Street expectations. Shares of Johnson & Johnson JNJ, -3.10% another Dow component, slid after the company reported a drop in sales that offset stronger-than-expected profits. The pair represented the biggest losers on the Dow.
Netflix Inc. NFLX, -2.64% slumped, as investors grew concerned about the streaming-video company’s ability to attract and retain subscribers. The firm reported late Monday that it had added fewer subscribers than expected during the first quarter.
Overall, the tone of the latest batch of corporate reports was generally lackluster, said Kim Forrest, senior analyst and portfolio manager at Fort Pitt Capital.
Goldman stumbles in first-quarter earnings
Goldman Sachs’ first-quarter earnings report was a rare miss, and most other big banks reported large profits. Deputy Banking editor Aaron Lucchetti and Lunch Break’s Tanya Rivero discuss what went wrong at Goldman. Photo: Reuters
“The misses weren’t huge, but they didn’t quite make [the] analysts’ mark,” Forrest said.
Market participants have been looking to corporate earnings to justify a strong rally in equities that had taken stock benchmarks to records as recently as March 1, but that run-up has since stalled as doubts about valuations and concerns about President Donald Trump’s ability to quickly implement pro-growth policies weigh on sentiment.
But the recent spate of tepid earnings notwithstanding, analysts still expect a strong quarter for corporate results.
“S&P 500 is expected to deliver strongest earnings growth in 22 quarters with momentum driven by recovering U.S. and global economic growth, higher oil prices, and rising rates for financials compared to one year ago,” said Dubravko Lakos-Bujas, head of U.S. equity strategy at J.P. Morgan Chase & Co., in a note to investors.
News out of the U.K. also pressured the U.S. market, according to Jack Ablin, chief investment officer at BMO Private Bank, as British Prime Minister Theresa May called for a snap general election that she said would be necessary to strengthen her hand during negotiations with the European Union as the country exits the European trade bloc.
Recent lackluster U.S. economic data, including a disappointing March jobs report, have pressured markets lower, as have mounting tensions between the U.S. and several of its geopolitical rivals. Karyn Cavanaugh, market strategist at Voya Investment Management, said she expects shares to languish until a clearer picture of quarterly earnings emerges.
“The data, coupled with the geopolitical risk out there are making investors say ‘show me what you’ve got’— they want to see the earnings,” Cavanaugh said.
Tensions between the U.S. and North Korea remain elevated with both countries exchanging threats.
Meanwhile, President Trump signed an executive order Tuesday evening to further bolster his “Buy American, Hire American” program after visiting Snap-On Inc.’s SNA, -0.12% Wisconsin facility. The order will make it more difficult for foreign workers to secure working visas and promote the purchase of U.S.-made products.
Pence warns North Korea not to test Trump
Speaking alongside South Korea’s acting President Hwang Kyo-Ahn in Seoul, Vice President Mike Pence warned North Korea not to test Donald Trump’s resolve “or the strength of the armed forces of the U.S. in this region.”
Earnings to watch: Bank of America Corp. BAC, -0.44% and UnitedHealth Group Inc. UNH, +0.84% were the two standouts of Tuesday’s batch of earnings, but Bank of America shares fell while UnitedHealth rose.
Bank earnings have been mixed so far this quarter, with strong reports by J.P. Morgan Chase & Co. JPM, -0.82% and Citigroup Inc. C, -0.97% offset by weakness at Goldman and Wells Fargo & Co. WFC, -0.51%
Stock movers: Shares of United Continental Holdings Inc. UAL, -4.27% reversed gains to drop more than 4% after the United Airlines’s parent company late Monday reported adjusted earnings that beat expectations.
United CEO Oscar Munoz said in the earnings statement that the incident of a passenger being forcibly removed from a plane was a “humbling experience.”
Post Holdings Inc. POST, -3.81% shares sank over 4% after the packaged food company said it is buying iconic U.K. breakfast brand Weetabix Food Co. for £1.4 billion ($1.76 billion).
Economic news and Fed speakers: Manufacturing output fell in March for the first time since last August, according to a batch of industrial-production data released Tuesday. Also, a reading on housing starts, which measure the number of new-home construction projects that broke ground during a given month, was slightly weaker than expected in March.
Kansas City Federal Reserve President Esther George, speaking at Bard College Tuesday morning, said the central bank should begin reducing its balance sheet this year, echoing remarks by other Fed officials, including New York Fed President William Dudley.
Other markets: The British pound rallied after May’s announcement about the snap election.
Gold GCM7, -0.02% settled slightly higher while silver and other industrial metals weakened.
—Sara Sjolin contributed to this article.