U.S. stock indexes finished mostly lower Thursday as disappointing earnings reports from several industrial-sector companies weighed on the market, offsetting strong results from Facebook, Microsoft and others.
3M, which makes Post-it notes and many other products, plunged 12.9% in heavy trading after announcing weak results and a restructuring program. It was the biggest loss for the company since the market crash of October 1987.
The loss for 3M pulled the Dow Jones industrial average into the red. The Standard & Poor’s 500 index slipped but held close to the record high it set Tuesday.
Facebook and Microsoft both rose after reporting strong earnings. That helped the Nasdaq composite eke out a small gain.
Traders have grown more optimistic that most companies will continue to deliver strong growth this year, despite some signs that point to a slowing global economy.
“Earnings are flowing, and we're going to see a positive earnings season,” said Karyn Cavanaugh, senior markets strategist at Voya Investment Management. If [the stock market] keeps going up, up, up, then that kind of makes you a little skeptical. The fact that investors are being a little bit more selective, that's a good sign.”
The S&P 500 slipped 1.08 points, or less than 0.1%, to 2,926.17. The Dow fell 134.97 points, or 0.5%, to 26,462.08. Without the loss from 3M, the Dow would have been 58 points higher.
The Nasdaq rose 16.67 points, or 0.2%, to 8,118.68.
Small-company stocks fared worse than the rest of the market. The Russell 2000 index slid 12.52 points, or 0.8%, to 1,575.61.
Bond prices fell. The yield on the 10-year Treasury note rose to 2.53% from 2.52%.
Earnings reporting season is more than a third of the way done, and investors are searching for clues about whether profit growth can accelerate this year after a weak first quarter. The stock market has had a furious rally this year, largely because the Federal Reserve has said it is halting its plan to raise interest rates, at least temporarily.
Industrial stocks declined Thursday after 3M reported lower first-quarter revenue and profit than Wall Street expected and slashed its full-year profit forecast.
United Parcel Service said its net income fell 17% on nearly flat revenue, and Illinois Tool Works had weaker revenue than analysts forecast. Rockwell Automation said its automotive-related sales fell short of its expectations.
UPS shares sank 8.1%. Illinois Tool Works fell 3.6%. Rockwell Automation sank 6.7%.
Defense contractor Raytheon, which is also in the industrial sector, fell 4.4%. It reported stronger quarterly profit than expected, but analysts noted some mixed results for its profit margins.
All told, the companies helped drag industrial stocks down 2%, the steepest loss by far among the 11 sectors that make up the S&P 500.
Altria Group slid 6% after the nation's largest cigarette maker reported weak quarterly results on lower sales and a hefty investment in cannabis company Cronos.
Other companies’ quarterly report cards blew past expectations.
Facebook shares surged 5.8% after the social media giant reported a 26% jump in quarterly revenue. That helped lift the communications sector 1.1%.
Microsoft stock climbed 3.3% after the software maker said its revenue jumped 14% from the year earlier-quarter.
Coming into this earnings reporting season, Wall Street was expecting a dud. Partially because of slowing economic growth around the world, analysts were forecasting the first drop in S&P 500 companies’ earnings in nearly three years.
Companies, though, have been surprising analysts with not-as-bad results. So far, about 190 of the companies in the S&P 500 have reported their earnings for the first three months of the year. Among them, earnings actually grew 2.1% from a year earlier.
All the better-than-expected results mean analysts are now forecasting a drop of 2.8% in earnings for S&P 500 companies this reporting season. That's not as bad as the 4% decline they were expecting a few weeks ago.
Energy futures finished mixed. Benchmark U.S. crude fell 1% to $65.21 a barrel. Brent crude fell 0.3% to $74.35 per barrel.
Wholesale gasoline inched up 0.2% to $2.13 a gallon. Heating oil was little changed at $2.10 a gallon. Natural gas rose 2.1% to $2.51 per 1,000 cubic feet.
Gold was little changed at $1,279.70 an ounce. Silver fell 0.2% to $14.88 an ounce. Copper slid 1.7% to $2.86 per pound.