Stocks close lower, weighed down by falling oil prices and weak earnings
U.S. stocks slipped in quiet trading Monday as energy companies dropped with the price of oil. Metals and chemicals companies also fell. Company earnings remain weak, and Xerox and drugmaker Perrigo tumbled after reporting disappointing results and cutting their forecasts for the year.
Stocks looked like they were headed for big losses in the morning, as the Dow Jones industrial average dropped as much as 148 points. Stocks recovered most of those losses over the last hours of trading. Investors traded less than usual as they looked through a weak group of company earnings and prepared for the latest Federal Reserve meeting, which will conclude Wednesday.
“The market is being restrained as much by uncertainty over companies’ ability to generate earnings growth and revenue growth as they are around uncertainty over Fed policy,” said Justin Christofel, portfolio manager with BlackRock’s Multi-Asset Income Fund.
Over the last week, company earnings have generally been better than expected, but Christofel said that’s because investors weren’t expecting much.
The Dow Jones industrial average fell 26.51 points, or 0.2%, to 17,977.24. The Standard & Poor’s 500 index slid 3.79 points, or 0.2%, to 2,087.79. The Nasdaq composite index went down 10.44 points, or 0.2%, to 4,895.79.
Xerox cut its earnings estimate for the year after its first-quarter profit plunged 85%. The company’s revenue fell, and costs went up as it gets ready to split into two businesses. The stock dived 13.3% to $9.68.
Irish drugmaker Perrigo skidded after it cut its profit forecast. The company said prices for over-the-counter products in Europe are down, and it may take an impairment charge for a business it bought just a year ago. Perrigo’s chairman and chief executive, Joseph Papa, also left the company to join Valeant Pharmaceuticals. The stock plunged 18.1% to $99.40.
About a third of the companies in the S&P 500 will report their earnings this week. Wall Street isn’t feeling optimistic: According to Lindsey Bell of S&P Global Market Intelligence, analysts think earnings will fall 8%. That would be the third straight quarterly decline, and the largest in seven years.
“Earnings have been revised down viciously this quarter,” Christofel said.
Investors kept their powder dry as they waited to see what central banks in the U.S. and Japan will do. The Federal Reserve will meet Tuesday and Wednesday, and although investors don’t think the Fed will raise interest rates this month, they will review the Fed’s comments about the state of the U.S. and global economy. Bank of Japan officials will meet later in the week and could take new actions to stimulate the Japanese economy.
Benchmark U.S. crude fell $1.09, or 2.5%, to $42.64 a barrel in New York. Brent crude, used to price international oils, lost 63 cents, or 1.4%, to $44.48 a barrel in London. Transocean stock sank 4.9% to $10.26, and Hess fell 2.4% to $61.87.
Gannett, the owner of USA Today and other newspapers, offered to buy Tribune Publishing for $388 million. Tribune owns 11 newspapers including the Los Angeles Times and Chicago Tribune. It said Tribune has refused to start constructive talks.
The offer values Tribune Publishing at $12.25 per share. Tribune shares jumped 52.9% to $11.50. Gannett’s stock rose 6.5% to $16.79.
Industrial and materials companies fell. Railroad company Union Pacific slid 2.3% to $87.61, and mining and construction equipment maker Caterpillar declined 2% to $76.79.
Consumer companies traded higher. Supermarket operator Kroger rose 3.3% to $36.77, and spice retailer McCormick advanced 1.7% to $93.29. Tyson Foods rose 1.6% to $64.08.
The federal government approved Charter Communications’ bid to buy Time Warner Cable. Time Warner Cable stock rose 4.1%, to $209.63 and Charter jumped 4.6% to $207.01. If California utility regulators approve the deal, which they are expected to do, Charter will become the second-largest Internet provider and third-largest video company in the nation.
Homebuilder stocks fell as U.S. sales of new homes decreased for the third month in a row. The Commerce Department said overall sales fell 1.5% in March as sales in the West dropped more than 20%. PulteGroup shares sank 1.3% to $18.81, and KB Home dropped 1.8% to $14.14.
The government of Saudi Arabia said a small portion of the world’s largest oil company will go public. Saudi Aramco has long been considered the most valuable company in the world, and the kingdom valued it at more than $2 trillion. Apple, the most valuable publicly traded company, has a market capitalization of about $583 billion.
The price of gold and silver each ticked higher. Gold rose $10.20 to $1,240.20 an ounce, and silver climbed 11 cents to $17 an ounce. Copper fell 1 cent to $2.25 a pound.
In other energy trading, wholesale gasoline fell two cents to $1.51 a gallon. Heating oil slipped two cents to $1.29 a gallon. Natural gas fell eight cents to $2.06 per 1,000 cubic feet.
Germany’s DAX fell 0.8%, and the CAC 40 in France slipped 0.5%. Britain’s FTSE 100 lost 0.8%. Japan’s benchmark Nikkei 225 declined 0.8%. In South Korea the Kospi inched down 0.1%. Hong Kong’s Hang Seng fell 0.8%.
Bond prices fell and the yield on the 10-year U.S. Treasury note rose to 1.91% from 1.89%. The euro rose to $1.1261 from $1.1245. The dollar fell to 111.28 yen from 111.67 yen.
