U.S. stocks extended their losses into a second day Wednesday as railroad operator CSX had its biggest drop in 11 years, pulling other industrial companies down with it.
Bank shares fell as investors worried that lower interest rates will hurt their profits. Investors expect that at the Federal Reserve’s policy meeting in two weeks, the central bank will cut interest rates for the first time in a decade.
The yield on the 10-year Treasury fell to 2.05% from 2.12% as investors headed for less risky holdings. Utilities stocks, which are also considered a safer bet than most other equities, made gains late in the session and held up better than any other industry.
Abbott Laboratories climbed 3.1%, pushing the healthcare sector up, after the maker of infant formula and drugs raised its forecast for the year. UnitedHealth Group also rose.
Healthcare was the only sector other than utilities to finish the day in the black. Technology stocks gave up early gains and finished lower along with the rest of the market.
The benchmark Standard & Poor’s 500 index declined 19.62 points, or 0.7%, to 2,984.42. The Dow Jones industrial average fell 115.78 points, or 0.4%, to 27,219.85. The Nasdaq composite fell 37.59 points, or 0.5%, to 8,185.21. Small-company stocks also fell. The Russell 2000 index slid 11.22 points, or 0.7%, to 1,550.78.
Corporate earnings reports are getting into full swing this week, and investors have been mostly cautious in their assessments of them. S&P 500 companies’ second-quarter earnings are still expected to decline.
CSX shares dived 10.3% after the railroad company said it now expects its revenue to decline as much as 2% this year, after previously saying it expected growth. Investors read that as trouble for the entire industry and pushed down the stocks of other railroad operators. Union Pacific sank 6.1%. Norfolk Southern dropped 7.5%.
Netflix, which reported its results after the close of regular trading Wednesday, sank 10% in after-hours trading after reporting a dramatic slowdown in growth during its traditionally sluggish spring season.
UnitedHealth Group, Phillip Morris and Morgan Stanley are scheduled to release their quarterly results Thursday.
So far, corporate profits have been beating Wall Street forecasts. But investors are keeping a close watch on the picture companies paint for the second half of the year.
“You’re getting tempered guidance for the most part,” said Lindsey Bell, investment strategist at CFRA Research. “It’s more of a reality check. Second-half growth is not guaranteed.”
Investors are likely to pause and take a more cautious approach, she said, as stock indexes reach record highs. The technology-heavy Nasdaq is up more than 23% for the year and the broad S&P 500 is up more than 19%.
A weak home construction report loomed over companies that build homes. Hovnanian shares slid 3.1%, Lennar lost 2%, and Toll Bros. fell 1.9%. U.S. home construction slipped last month as an uptick in the building of single-family homes was offset by a big drop in apartment construction. The figure fell short of economists’ forecasts.
Nu Skin Enterprises fell 14.6% after the seller of skin care and nutritional products slashed its profit and revenue forecast for the year. The company and other direct sellers of wellness products are facing increased scrutiny from the Chinese government. Nu Skin gets 33% of its revenue from China, according to FactSet.
Cintas rose 8.7% after the uniform rental company beat analysts’ profit and revenue forecasts for its fiscal fourth quarter. The company also gave investors a solid profit forecast for its current fiscal year.
Benchmark crude oil fell 84 cents to $56.78 a barrel. Brent crude oil, the international standard, fell 69 cents to $63.66 a barrel. Wholesale gasoline fell 1 cent to $1.88 a gallon. Heating oil fell 1 cent to $1.89 a gallon. Natural gas fell 1 cent to $2.30 per 1,000 cubic feet.
Gold rose $12.10 to $1,421.30 an ounce, silver rose 29 cents to $15.89 an ounce, and copper rose 2 cents to $2.71 a pound.