By Ellie Ismailidou and Victor Reklaitis, MarketWatch
Coke tumbles 4.7% on weak earnings, weighs on Dow
U.S. stock advances firmed late-morning Wednesday as a
turnaround in crude prices and upbeat housing data helped support
appetite for stocks during a choppy day of trading.
Crude-oil prices turned up after the U.S. Energy Information
Administration showed a lower build in supplies than feared.
Most recently, the S&P 500 was up 5 points, or 0.3%, at
2,106, led by gains in energy and tech stocks. The consumer-staples
sector was the worst performer on the index, down 0.8% on the day,
and 0.7% over the month, the third-worst monthly performance,
according to FactSet data Telecommunication stocks and utilities
are the worst performers so far in April.
The Dow Jones Industrial Average advanced 56 points, or 0.3%, at
18,109, led by a 2.5% gain in UnitedHealth Group Inc. (UNH), which
on Tuesday said it plans to exit by 2017 most of the Affordable
Care Act state exchanges where it currently operates. But the
blue-chip gauge was weighed by sharp losses for Coca-Cola Co.(KO),
down 4.8%, and Boeing Co.(BA)off 2.7%.
Meanwhile, the Nasdaq Composite climbed 20 points, or 0.4%, at
4,960.
Disappointing announcements from tech giants like Intel Corp.
and a sharp decline in China stocks sapped some investor
enthusiasm, earlier in the session but stocks pivoted higher as
crude oil swung into positive territory.
On the data front, news that existing home sales rebounded
strongly in March
(http://www.marketwatch.com/story/existing-home-sales-soar-51-in-march-as-housing-demand-remains-strong-2016-04-20)
was signaling healthy demand in the housing market and highlighting
strength in that segment of the U.S. economy.
The recent rally in equities brings stock benchmarks within a
stone's throw of records set last May,
(http://www.marketwatch.com/story/dow-on-pace-to-rise-further-above-18000-as-stock-futures-gain-2016-04-19)
but the relatively rapid turnaround since Feb. 11 lows has some
market participants nervous.
The market was getting "perilously closer to massive levels of
congestive resistance," said Tim Anderson, managing director at MND
Partners, in emailed comments.
One factor that has helped boost stocks is crude-oil prices,
which have been viewed as a gauge of the health of the broader
market, although that linkage has been breaking down of late.
"If the oil sector continues to rally and banks can hold most of
their gains from the February lows, don't discount the possibility
of new highs on the S&P 500," Anderson said.
But others cautioned that the fundamentals don't warrant a
significant move higher, as the recent rallies have been driven by
undue optimism about corporate earnings that exceeded very low
expectations.
"Beating low estimates, is not the same as meaningfully moving
forward," said Karyn Cavanaugh, senior market strategist at Voya
Financial.
According to Cavanaugh, earnings have been the key catalyst of
recent rallies, along with a Federal Reserve that is holding rates
steady because of sluggish economic growth and subdued inflation
expectations. The Fed is slated to meet next week at its two-day
policy meeting April 26-27.
Though the dovish Fed has fueled risk appetite--promising that
ultraloose monetary policies will stay in place for a little
longer--investors should remember that "the reason the Fed is
holding steady is that economic conditions are actually not that
great," which warrants caution, Cavanaugh said.
West Texas Intermediate crude and Brent has been lower after
Kuwaiti workers ended a three-day strike
(http://www.marketwatch.com/story/oil-prices-slide-over-2-as-kuwait-workers-calls-off-three-day-strike-2016-04-20),
which had supported oil futures this week.
The U.S. Energy Information Administration
(http://www.marketwatch.com/story/oil-pares-loss-after-eia-reports-us-crude-supplies-up-21-million-barrels-2016-04-20)reported
a 2.1 million-barrel climb in crude-oil supplies for the week ended
April 15. That was below the 3.1 million-barrel increase reported
by the American Petroleum Institute late Tuesday, but above the
climb of 1.6 million barrels expected by analysts polled by
Platts.
The correlation between oil and stocks "has become weaker, but
oil is still a driver of the market for good and for ill," said Kim
Forrest, senior portfolio manager at Fort Pitt Capital. According
to Forrest, oil continues to be a proxy for global risk assets,
particularly as 2016 is expected to continue to be a year much more
volatile than what the market has seen in the past.
Individual movers:
Yahoo Inc.(YHOO) shares gained 3.1% as investors track the
ailing Internet pioneer's efforts to sell its core business
(http://www.marketwatch.com/story/yahoo-bidders-said-to-include-verizon-daily-mail-2016-04-19).
Coca-Cola Co.(KO) fell 4.8% after the beverage giant's quarterly
revenue missed forecasts.
(http://www.marketwatch.com/story/coca-colas-stock-drops-as-profit-beats-but-sales-miss-2016-04-20)
(http://www.marketwatch.com/story/coca-colas-stock-drops-as-profit-beats-but-sales-miss-2016-04-20)
Intel Corp.(INTC) shares turned positive, despite the fact that
the chip giant late Tuesday cut its revenue growth forecast and
announced plans to eliminate 12,000 jobs
(http://www.marketwatch.com/story/intel-to-cut-12000-jobs-2016-04-19-174852128).
Mitsubishi Motors Corp.(7211.TO)(8058.TO) dived 15% in Tokyo.
The Japanese auto maker on Wednesday admitted to cheating on
fuel-economy tests
(http://www.marketwatch.com/story/mitsubishi-admits-to-cheating-in-fuel-economy-tests-2016-04-20),
affecting about 625,000 vehicles, including cars made for rival
Nissan Motor Co. (NSANY)(NSANY). Investors are sensitive to news
about faking tests after Volkswagen AG's (VOW.XE)(VOW.XE) emissions
scandal, which erupted last year.
Global Payments Inc.(GPN) fell 1% following news late Tuesday
that the provider of payment services will join the S&P 500
(http://www.marketwatch.com/story/global-payments-to-replace-gamestop-on-sp-500-2016-04-19),
replacing retailer GameStop Corp.(GME)
American Express Co.(AXP), toy maker Mattel Inc.(MAT), KFC
parent Yum Brands Inc.(YUM) and chip company Qualcomm Inc.(QCOM)
are expected to post results after the bell.
Other markets:European stocks
(http://www.marketwatch.com/story/european-stocks-slip-from-three-month-high-2016-04-20)
showed little change after paring earlier losses, while Asian
markets
(http://www.marketwatch.com/story/shanghai-stocks-slide-36-as-china-markets-tumble-2016-04-20)
closed mostly lower, with the Shanghai Composite finishing down
2.3% but off its session low. Gold futures traded lower, and a key
dollar index was little changed
(http://www.marketwatch.com/story/dollar-drops-against-yen-as-asian-stocks-oil-head-south-2016-04-20).
(END) Dow Jones Newswires
April 20, 2016 11:58 ET (15:58 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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