U.S. Bank Shares Fall, European Stocks Slide on Political Uncertainty
April 18 2017 - 2:22PM
Dow Jones News
By Akane Otani and Mike Bird
Major stock indexes fell Tuesday, weighed by a slide in shares
of banks and health-care companies.
Investors have backed away from stocks in recent weeks while
picking up government bonds as tepid economic data, as well as
flaring political tensions around the world, stoked demand for
haven assets.
A series of disappointing earnings reports contributed to the
retreat in stocks Tuesday, investors and analysts said. With
investors' expectations for pro-growth policies from the Trump
administration waning, many say continued signs of corporate health
will be key to stocks moving higher.
"The market's taken a bit of a pause lately, and part of that
has to do with markets in the U.S. being at the high end of
valuations," said Mark Watkins, regional investment strategist at
the Private Client Group at U.S. Bank in Park City, Utah. "If we
see earnings that miss or are below expectations, that could be a
warning sign."
The Dow Jones Industrial Average lost 124 points, or 0.6%, to
20512. The S&P 500 fell 0.3% and the Nasdaq Composite lost
0.3%.
Bank stocks slid after a disappointing earnings report from
Goldman Sachs Group, whose first-quarter trading results fell short
of those posted by its rivals. Shares of Goldman Sachs fell 5%,
wiping away about 77 points from the Dow industrials. The KBW
Nasdaq Bank Index of leading U.S. commercial lenders lost 0.9%.
Bank of America shares initially traded higher, but were
recently down 0.5%, after the company reported a
higher-than-expected first-quarter profit and revenue that beat
analysts' expectations.
Declines in health-care stocks put further pressure on major
indexes, with Johnson & Johnson shedding 3.3% after the company
posted underwhelming sales in the latest quarter. Health-care
stocks fell 1.1% in the S&P 500.
"Now is when earnings become critical for the direction of the
markets moving forward," said Michael Binger, senior portfolio
manager at Gradient Investments. With stocks still trading near
their all-time highs, Mr. Binger said he would be watching for not
just solid earnings results but also a pickup in corporate
guidance.
Government bonds gained, with the yield on the 10-year U.S.
Treasury note falling to 2.188%, according to Tradeweb, from 2.248%
Monday. Yields fall as bond prices rise.
Elsewhere, European stocks dropped after British Prime Minister
Theresa May said she would call an early general election, a move
some analysts interpreted as an effort to get more leeway in
upcoming exit negotiations with the European Union.
The Stoxx Europe 600 index fell 1.1% and U.K.'s export-heavy
FTSE 100 lost 2.5%, weighed by a rally in the pound.
The U.K. currency jumped 1.8% against the dollar to $1.2788. A
stronger pound typically weighs on the FTSE 100, since it cuts into
sterling-denominated earnings.
"It seems like people are focusing on the positives. The
straightforward assumption is that [Ms. May will] win the election
and consolidate her control over Parliament," said Viraj Patel,
foreign exchange strategist at ING.
In Asia, the Shanghai Composite Index closed down 0.8% in its
third consecutive session of losses. Hong Kong's Hang Seng Index
fell 1.4%, its largest one-day decline since December.
Write to Akane Otani at akane.otani@wsj.com and Mike Bird at
Mike.Bird@wsj.com
(END) Dow Jones Newswires
April 18, 2017 14:07 ET (18:07 GMT)
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