NEW YORK: Dow industrials fall 20.55 points ahead of an earnings season that is expected to paint a bleak picture of corporate profits
U.S. stocks slipped at the start of a first-quarter earnings season that is expected to paint a bleak picture of corporate profits.
Major indexes reversed early gains on Monday, with the Dow industrials rising as much as 155 before finishing in the red. Some traders said investors were anxious ahead of earnings, following several consecutive quarters of discouraging reports.
“People are getting a little nervous,” said Tom Carter, managing director at JonesTrading. “I personally can’t wait to see how this all shakes out, whether we’re still in an earnings recession or not.”
The Dow Jones Industrial Average fell 20.55 points, or 0.1%, to 17556.41. The S&P 500 slid 5.61 points, or 0.3%, to 2041.99, while the Nasdaq Composite Index lost 17.29 points, or 0.4%, to 4833.40.
Shares of Alcoa fell in after-hours trading after the aluminum maker said its first-quarter earnings declined 92% and the company lowered its outlook for the aerospace market in 2016.
Analysts project earnings for S&P 500 companies to slump about 8.5% from a year earlier, according to FactSet estimates as of March 31, with particularly downbeat reports expected from the energy sector. “The corporate earnings outlook is low to flat,” said Oliver Pursche, chief executive at Bruderman & Co. Following a two-month rally in U.S. stocks, “the best word for sentiment right now is probably ‘confused,’ ” he said.
U.S. oil prices settled above $40 a barrel for the first time in nearly three weeks, as the dollar weakened and hopes rose that big producers would reach an agreement to reduce the global crude glut. U.S. oil gained 1.6%, to $40.36 a barrel.
Consumer staples companies fell the most in the S&P 500, with Kroger declining 82 cents, or 2.2%, to $37.17. Whole Foods lost 63 cents, or 2.1%, to 29.64.
Materials companies were among the gainers, with the sector rising 0.5%. Newmont Mining climbed 2.01, or 6.9%, to 31.11, as gold for April delivery rose 1.1%, to $1,256.70 a troy ounce.
Some investors said the earnings outlook wasn’t all bleak, as stabilizing commodity prices and a weaker dollar could improve earnings in coming months.
”I think people will give companies a bit of a pass until the second half of the year,” said Jim Tierney, chief investment officer for concentrated U.S. growth at AllianceBernstein.
In Asia, the Shanghai Composite Index rose 1.6%, and Japan’s Nikkei Stock Average fell 0.4%. In Europe, the Stoxx Europe 600 gained 0.3%, led by shares of mining companies and banks.
Italian bank shares soared as the government moved ahead with a plan for an investment fund aimed at helping domestic lenders shed bad loans and recapitalize. Banca Monte dei Paschi di Siena rose 9.8% in Milan.
“There’s a good chance that if this deal goes through, that’ll take some of those bad loans off the balance sheets in Italy and offer them capacity to go and lend and support the economy,” said Mike Bell, a global market strategist at J.P. Morgan Asset Management.
Banks in the U.S. will begin reporting earnings this week. Their shares have suffered as low interest rates have eroded earnings, while a steep decline in commodity prices at the start of the year increased concerns about lenders’ exposure to soured loans in the energy and mining sectors.
“Everyone’s looking forward to hearing from them, but boy, oh, boy, expectations are really depressed for the banks,” said Michael Antonelli, equity sales trader at Robert W. Baird.
Financial companies in the S&P 500 rose 0.3% Monday but are down 7.3% this year.
