Stocks Fluctuate as Johnson & Johnson Climbs, Netflix Shares Tumble
Stocks fluctuated late Tuesday as earnings reports came in mixed.
The S&P 500 was down 0.22%, the Dow Jones Industrial Average added 0.07%, and the Nasdaq slid 0.4%.
The S&P 500 and Dow rose to new records with only slight effort on Monday as a rally in tech helped to offset weakness in oil and political uncertainty in Turkey. The Dow eked out a new closing high of 18,533.05, mere points above its previous Friday record, while the S&P 500 scored a new high of 2,166.89.
Around one-tenth of S&P 500 companies have reported so far this season in what is expected to be another three-month period of shrinking earnings. The blended earnings estimate is expected to decline 4.3%, a slower decline than 5% in the first quarter.
Netflix (NFLX) - Get Report dominated headlines after falling short of analysts' estimates for subscriber numbers, a closely watched metric. The streaming service added 1.7 million international subscribers in its recent quarter, below its own forecast of 2.5 million. Earnings came in above estimates, though. Netflix earned 9 cents a share, three times consensus. Shares were down roughly 14%, proving a major drag on Wall Street.
Johnson & Johnson (JNJ) - Get Report was one of the best performers on the Dow, rising 1.4%, after topping estimates in its second quarter and raising its full-year forecasts. A new line of pharmaceutical products helped to boost growth, overshadowing a slide in sales in its consumer health business. The company earned an adjusted $1.74 a share, 6 cents above analysts' estimates, while revenue climbed nearly 4% to $18.48 billion. Its 2016 earnings guidance was increased to $6.63 to $6.73 a share from $6.53 to $6.68 billion.
Yahoo! (YHOO) also reported a disappointing quarter. The Internet company reported its second-quarter loss widened to $440 million, while adjusted revenue, which excluded commissions paid for Web traffic, tumbled nearly 20%. Yahoo! made no mention of the possible sale of its core businesses, though Monday marked the final day for offers.
Goldman Sachs (GS) - Get Report was lower despite a better-than-expected second quarter. The financial institution earned $3.72 a share over the quarter compared to an expected $3.04. Revenue of $7.93 billion was 12% lower than a year earlier, though exceeded estimates of $7.48 billion. Shares fell 0.8% in early trading Tuesday.
Aerospace and military manufacturer Lockheed Martin (LMT) - Get Report exceeded estimates on its top- and bottom-lines. The company earned $3.32 a share, well above expectations of $2.94 a share. Revenue of $12.9 billion beat by $300 million.
"We cannot stress enough how impressive this beat was, especially given the stock's incredible run over the last couple of months," said Jim Cramer and Jack Mohr, co-portfolio managers of theAction Alerts PLUS Charitable Trust Portfolio, which holds LMT. "In the face of high expectations, the defense titan quite literally fired on all cylinders."
Crude oil was pressuring markets Tuesday ahead of a weekly reading on inventories from the American Petroleum Institute out after the bell and an official read from the Energy Information Administration mid-morning Wednesday. Ballooning global supplies and production have pummeled crude prices since last year.
West Texas Intermediate crude oil closed down 1.3% at $44.65 a barrel on Tuesday afternoon.
"The price of oil has come down on over-supply fears from OPEC producers, despite improving economic data from the U.S. and China," Peter Cardillo, chief market economist at First Standard Financial, wrote in a note. "The price movement has challenged the lower end of our trading range under $47. However, prices have not slipped to levels that would suggest a renewed downward trend is about to unfold."
Monsanto (MON) rebuffed a sweetened offer from Bayer (BAYRY) - Get Report on Tuesday, though said it was open to further discussions with the chemical company and others interested in M&A talk. Bayer had raised its offer to $125 a share from $122 a share last Thursday in an all-cash bid.
Housing starts in June climbed, the Commerce Department said on Tuesday, driven by a high level of demand and tight inventory. Starts for newly constructed homes rose 4.8% last month to an adjusted annual pace of 1.19 million. Economists had expected a pace of 1.17 million. May's numbers were revised down to 1.14 million from 1.16 million. Housing permits increased 1.5% to 1.15 million.
"The overall tone of this report was encouraging, pointing to further upside momentum in U.S. housing market activity," said Millan Mulraine, deputy chief U.S. macro strategist at TD Securities. "The buoyancy in both construction activity and building intentions speaks to the renewed level of confidence among U.S. homebuilders about the outlook for this sector, and we continue to expect the recovery in this segment of the US economy to remain on track in the coming months."