Weak earnings, strong dollar hit large-caps; small-caps gain

By Amy Caren Daniel (Reuters) - U.S. stocks were set for their biggest drop in a week on Thursday as weak earnings reports were compounded by a strong dollar that not only hit metal prices and weighed on miners, but also raised concerns about future corporate revenue growth

Reuters July 20, 2018 00:07:59 IST
Weak earnings, strong dollar hit large-caps; small-caps gain

Weak earnings strong dollar hit largecaps smallcaps gain

By Amy Caren Daniel

(Reuters) - U.S. stocks were set for their biggest drop in a week on Thursday as weak earnings reports were compounded by a strong dollar that not only hit metal prices and weighed on miners, but also raised concerns about future corporate revenue growth.

The Federal Reserve's bullish view of the U.S. economy and trade tension pushed the greenback to a one-year high and fanned worries about companies that get a substantial part of their revenue from overseas.

U.S. multinationals are starting to reevaluate their currency hedging strategies, especially after Netflix said earlier this week that a strong dollar would hurt its margins.

"When you see concerns over trade arise, you see small caps and the dollar typically rise and that shows they are seen as safe haven assets," said Shawn Cruz, manager of trader strategy at TD Ameritrade in Chicago, ‎Illinois.

While the large- and mid-cap indexes dipped, the small-cap Russell 2000 index rose 0.42 percent.

The flattening U.S. yield curve, close to levels not seen in 11 years, weighed on banks. JPMorgan, Bank of America and Citigroup all were down more than 1 percent.

The financial sector fell 1.43 percent, the most among the 11 S&P sectors. Weak earnings from insurer Travelers, down 3.1 percent, and American Express, down 2.7 percent, also weighed.

The materials group fell 0.8 percent as metal prices dropped. Copper miner Freeport-McMoRan sank 7.4 percent, the most on the S&P.

Alcoa plunged 12.4 percent after the aluminum producer cut its full-year forecast, blaming tariffs. Steel producer Nucor, whose profit missed estimates, dropped 2 percent.

The markets briefly pared losses after President Donald Trump told CNBC he was "not thrilled" about the Fed's decision to hike interest rates.

At 13:18 a.m. EDT the Dow Jones Industrial Average was down 108.21 points, or 0.43 percent, at 25,091.08, the S&P 500 was down 8.88 points, or 0.32 percent, at 2,806.74 and the Nasdaq Composite was down 23.62 points, or 0.30 percent, at 7,830.82

Still, advancing issues outnumbered decliners by a 1.26-to-1 ratio on the NYSE and by a 1.14-to-1 ratio on the Nasdaq.

Market optimism was also dented by disappointing earnings reports from eBay, slumping 7.8 percent, and Phillip Morris, falling 2.5 percent.

Microsoft was down 0.4 percent ahead of its results after the bell.

Among the bright spots was IBM, which gained 2.8 percent after its results topped estimates.

Comcast gained 2.9 percent after dropping its pursuit of a group of media assets owned by Twenty-First Century Fox, which fell 1.3 percent.

Disney, which has agreed on a deal to buy the Fox assets, rose 2 percent.

The S&P index recorded 19 new 52-week highs and two new lows, while the Nasdaq recorded 81 new highs and 28 new lows.

(Reporting by Amy Caren Daniel and Savio D'Souza in Bengaluru; Editing by Arun Koyyur)

This story has not been edited by Firstpost staff and is generated by auto-feed.

Updated Date:

TAGS:

also read

France, Germany to agree to NATO role against Islamic State - sources
| Reuters
World

France, Germany to agree to NATO role against Islamic State - sources | Reuters

By Robin Emmott and John Irish | BRUSSELS/PARIS BRUSSELS/PARIS France and Germany will agree to a U.S. plan for NATO to take a bigger role in the fight against Islamic militants at a meeting with President Donald Trump on Thursday, but insist the move is purely symbolic, four senior European diplomats said.The decision to allow the North Atlantic Treaty Organization to join the coalition against Islamic State in Syria and Iraq follows weeks of pressure on the two allies, who are wary of NATO confronting Russia in Syria and of alienating Arab countries who see NATO as pushing a pro-Western agenda."NATO as an institution will join the coalition," said one senior diplomat involved in the discussions. "The question is whether this just a symbolic gesture to the United States

China's Xi says navy should become world class
| Reuters
World

China's Xi says navy should become world class | Reuters

BEIJING Chinese President Xi Jinping on Wednesday called for greater efforts to make the country's navy a world class one, strong in operations on, below and above the surface, as it steps up its ability to project power far from its shores.China's navy has taken an increasingly prominent role in recent months, with a rising star admiral taking command, its first aircraft carrier sailing around self-ruled Taiwan and a new aircraft carrier launched last month.With President Donald Trump promising a US shipbuilding spree and unnerving Beijing with his unpredictable approach on hot button issues including Taiwan and the South and East China Seas, China is pushing to narrow the gap with the U.S. Navy.Inspecting navy headquarters, Xi said the navy should "aim for the top ranks in the world", the Defence Ministry said in a statement about his visit."Building a strong and modern navy is an important mark of a top ranking global military," the ministry paraphrased Xi as saying.