Dow Slides as McDonald's Disappoints, New Home Sales Climb

Stocks trade mixed Tuesday as a number of positive and negative earnings report keep traders active.
By Keris Alison Lahiff ,

Stocks were mixed on Tuesday morning as a number of positive and negative earnings report kept traders active.

The S&P 500 was flat, the Dow Jones Industrial Average slid 0.2%, and the Nasdaq rose 0.3%.

McDonald's (MCD) - Get Report  was a major drag on the Dow, falling 4% after same-store sales missed estimates in the second quarter. The world's largest fast food chain reported quarterly same-store sales growth of 3.1%, lower than an expected 3.6%. Second-quarter earnings of $1.25 a share fell 1% from a year earlier and missed consensus of $1.39.

Verizon (VZ) - Get Report reported a drop in profit in its recent quarter as an April-May worker strike hit its bottom line. The telecom earned 17 cents a share, sharply lower than $1.04 a year earlier. Adjusted earnings of 94 cents a share came in 2 cents above estimates. Around 36,000 workers were on strike for seven weeks earlier in the year. The stock fell 2%.

Caterpillar (CAT) - Get Report  detailed more job cuts and a reduced second-half outlook as demand from the oil industry continues to wither. The machinery maker now expects to earn $3.55 a share, excluding restructuring costs, down from an already-reduced previous forecast of $3.70. "We're not expecting an upturn in important industries like mining, oil and gas and rail to happen this year," CEO Doug Oberhelman said in a statement.

DuPont (DD) - Get Report added nearly 1% after raising the low end of its full-year profit forecasts. The chemicals producer expects 2016 adjusted earnings between $3.15 and $3.20 a share, up from a prior range of $3.05 to $3.20. The company reported an 8.4% increase in profit in its recent second quarter thanks to lower costs in its agriculture unit.

Eli Lilly (LLY) - Get Report moved slightly higher as sales of newly-released drugs including diabetes drug Trulicity and cancer drug Cyramza helped to fuel volume growth. Revenue rose 8.6% to $5.4 billion, higher than an expected $5.15 billion. Adjusted profit of 86 cents a share was in line with estimates.

BP (BP) - Get Report fell 1.7% after second-quarter underlying replacement cost profit of $720 million came in well below analysts' predictions of about $840 million. An improvement in oil prices failed to compensate for weaker earnings from its refining business. Oil and gas production returned to profit, though only a slight one, after a $747 million loss in the first quarter.

United Technologiesundefined exceeded analysts' estimates on its top- and bottom-lines over the second quarter and raised the low end of its sales and profit forecast for the full year. The aerospace developer earned $1.71 a share, higher than an expected $1.68, while revenue of $14.9 billion topped forecasts by $200 million.

Gilead Sciences (GILD) - Get Report bested profit estimates in its second quarter, while reporting in-line revenue. The biotech developer earned an adjusted $3.08 a share, 6 cents above forecasts. Sales slid 5.6% from a year earlier to $7.78 billion. Gilead also cut its full-year net product sales outlook to between $29.5 billion and $30.5 billion.

Express Scripts (ESRX) was slightly higher despite missing sales expectations in its recent quarter. The pharmacy-benefit manager generated revenue of $25.2 million, slightly lower than a year earlier and $200,000 below estimates. Adjusted earnings of $1.57 a share met consensus.

Anheuser-Busch InBev (BUD) - Get Report raised its offer for SABMiller (SBMRY) after calls for a sweetened offer given the sharp decline in the pound. The pound has declined by more than 10% since the June 23 U.K. Brexit referendum. AB InBev lifted its offer by 1 pound to 45 pounds a share ($59), valuing the total deal at around 79 billion pounds ($104 billion).

Mobileye (MBLY)  sank more than 8% on Tuesday after announcing the end to its partnership with Tesla (TSLA) - Get Report . The company had lent its driver-assistance technology to Tesla's autopilot feature. Mobileye topped earnings and sales estimates earlier in the session. 

New home sales increased 3.5% to a seasonally adjusted pace of 592,000 in June, according to the Commerce Department. Sales were at their highest since February 2008 and surpassed consensus of 560,000. The median price of new homes climbed 6% to $306,700. Over the second quarter, sales of new homes rose 10%.

Home prices in 20 major U.S. cities advanced 1.2% in May, according to the Case-Shiller 20-city composite index. Prices have now risen 5% over the past 12 months. Portland enjoyed its fastest 12-month growth, rising at 12.5%, while New York endured its weakest. Growing prices and constrained inventory have driven the housing sector's growth in recent months.

Consumer confidence remained strong in July, supported by an uptick in positive attitudes over the labor market and general business conditions. The Conference Board's index fell only slightly to 97.3 in July from 97.4.

"Overall, the upbeat tone of these reports will offer further encouragement to the [Federal Reserve] as they meet this week to discuss the outlook for the U.S. economy," Millan Mulraine, deputy chief U.S. macro strategist at TD Securities, wrote in a note. "The resiliency in household sentiment will be a critical piece of evidence underscoring only a modest hit to consumer confidence."

Members of the Federal Open Market Committee will group on Tuesday for a two-day meeting, followed by an announcement on Wednesday afternoon. A press conference won't be held afterward.

The likelihood of a move in July is low, though the Fed statement will be closely analyzed for hints as to when the central bank might adjust its monetary policy after initial liftoff last December. A rate hike in July currently has a 2.4% probability, according to CME Group Fed funds futures. A December rate hike is the most likely with a 40% chance.

"We expect the tone of the communique to be more upbeat, reflecting the better-than-expected economic data over the past six weeks as well as much more stimulative financial market conditions," Deutsche Bank analysts wrote in a note. "However, the Fed will not go as far as it did last October, when it strongly hinted at a rate hike at the ensuing meeting in December. This time, the Fed will be more careful to leave its options open, preferring to see how the data evolve between now and ... September."

Crude oil extended losses Tuesday after settling at a three-month low a day earlier. Prices were under pressure on an expected decline in U.S. refinery activity. Morgan Stanley cut its global refinery demand forecast for crude to 625,000 barrels a day, down from 800,000.

West Texas Intermediate crude oil fell 0.9% to $42.74 a barrel on Tuesday morning, halving losses of more than 1% seen earlier in the day.

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