Stocks end lower as IBM tanks 5.8%
A cloudy earnings picture pulled the Dow and U.S. stocks lower Tuesday on Wall Street.
Traders are weighing the weak year-end profit guidance from Dow component IBM (IBM) last night with earnings beats before today's opening bell from a trio of other Dow stocks, mobile phone player Verizon (VZ), insurer Travelers (TRV) and tech and aerospace firm United Technologies (UTX). Only Verizon topped revenue projections.
IBM shares ended down 5.8% to $140.64. Given that the Dow Jones industrial average is a price-weighted index and IBM is one of its highest-priced stocks, Big Blue's woes took a toll. However, the earnings beats and higher stock prices from the three other Dow components offset IBM's negative drag. Verizon shares climbed 1.2%, United Technologies surged 3.9% and Travelers finished up 2.5%.
Verizon beats Street with third quarter earnings
The Dow ended the day down a scant 13 points — off less than 0.1% — after bouncing in and out of negative territory. The Standard & Poor's 500 stock index slid 0.1%. The Nasdaq composite dived deeper into the red, skidding 0.5%, but remains alone among the three major benchmarks in posting gains for the calendar year.
The Dow was riding a three-week winning streak and rose nearly 15 points Monday. Stocks have rebounded in recent weeks following the market's first 10% price dip in four years. Traders have gotten more bullish following signals from the Federal Reserve that they might not hike interest rates until early next year. Low rates, of course, have been a big driver of stock gains in the bull market that began back in March 2009.
Many traders and money managers say the market is a tad "overbought" at the moment following a run higher of nearly 9% off the lows in late August. The broad market is also running into so-called "overhead resistance," which makes gains harder to come by as the market runs up into a prior price ceiling, notes Patrick Adams, a money manager at Choice Investment Management.
Wall Street is closely watching incoming earnings as the reporting season kicks in to high gear this week. Analysts are still expecting profit for the S&P 500 to contract this quarter for the first time since 2009.
Another stock on the move today is Yum Brands (YUM), which announced it is splitting the company in two, with one company focusing solely on its China business. Yum shares were up 3.8% to $74.48.
Stock performance in Asia was mixed overnight. Japan's Nikkei 225 rose 0.4% and mainland China's Shanghai composite was up 1.1% but Hong Kong's Hang Seng index fell 0.4%.
European stocks were down but off their lows for the day. Germany's DAX was down 0.1% and the CAC 40 in Paris was down 0.6%.