Stocks end slightly lower in quiet trading; Virgin America shares soar
U.S. stocks fell slightly in quiet trading Monday as investors worked through several company announcements and prepared for a new wave of company earnings releases.
Healthcare companies were solidly higher. Global markets rose modestly.
The Dow Jones industrial average fell 55.75 points, or 0.3%, to 17,737. The Standard & Poor’s 500 index slid 6.65 points, or 0.3%, to 2,066.13, and the Nasdaq composite sank 22.75 points, or 0.5%, to 4,891.80.
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Although stocks have recovered most of their losses from earlier in the year, investors remain somewhat pessimistic about the market in the near term, especially ahead of the quarterly earnings reporting season, which unofficially beings next week with results from aluminum mining company Alcoa.
Profits of companies in the S&P 500 are expected to drop 8.5% compared with a year earlier, according to data from FactSet, with most of that decline coming from the oil and gas sector.
This is despite the continually positive U.S. economic reports, including last week’s jobs numbers and manufacturing data.
“While the economic fundamentals are good, investor sentiment is still quite negative,” said Samantha Azzarello, a global market strategist at J.P. Morgan Funds.
The low expectations for company earnings mean stock values remain relatively high. Investors are paying roughly $18.63 for every dollar of earnings in the S&P 500, well above the $14 to $15 they typically pay.
“You’re going to need a big improvement in companies’ results for stocks to move higher,” said Kristina Hooper, head of U.S. investment strategies at Allianz Global Investors.
Stocks were not as affected by a noticeable drop in oil prices Monday, continuing a trend that started last week. Benchmark U.S. crude fell $1.09, or 3%, to $35.70 a barrel on the New York Mercantile Exchange. Brent crude, used to price international oils, slid 98 cents to $37.69 a barrel in London.
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Weeks earlier, a sharp drop in oil prices could have reverberated far more greatly on the stock market. Azzarello says the breakdown in oil’s influence on stocks could ultimately be a good thing.
“The market just had to work itself out,” Azzarello said.
In individual company news, Virgin America jumped 42% to $55.11 after the Burlingame-based airline agreed to be bought by Alaska Air Group. Shares of Alaska Air fell 4% to $78.92. JetBlue, which had bid for Virgin as well, fell 4.3% to $20.41.
Tesla Motors rose 4% to $246.99 after the Palo Alto automaker announced it had received 276,000 preorders for its highly anticipated Model 3 electric car, which was unveiled Thursday.
Bond prices rose slightly. The yield on the 10-year Treasury note fell to 1.76% from 1.77%. The euro was mostly unchanged at $1.1397. The dollar fell to 111.26 yen from 111.73 yen.
In other energy markets, heating oil fell 4 cents to $1.089 a gallon, wholesale gasoline futures fell 2 cents to $1.377 a gallon and natural gas rose 4 cents to $1.998 per 1,000 cubic feet.
In the metals markets, gold fell $4.20 to $1,219.30 an ounce, silver fell 10 cents to $14.94 an ounce and copper fell 2 cents to $2.14 a pound.
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