Stocks Under Pressure on Global Growth Woes
Stocks remained under pressure, though off lows, as investors showed concern over the health of the global economy.
The S&P 500 was down 0.87%, the Dow Jones Industrial Average fell 0.75%, or 134 points, and the Nasdaq slid 0.94%. Benchmark indexes had been more than 1% lower earlier in the session.
The Nasdaq was down for the eighth time in nine sessions, while the S&P 500 and Dow were down for the third time in four.
An unofficial reading on factory activity in China fell further into contraction in April, cementing concerns over the health of the world's second-largest economy. The Markit and Caixin Media survey saw activity fall to 49.4 in April from 49.7 in March, declining further below 50, the level separating expansion from contraction. This is the 14th straight month in contraction.
The European Commission added to growth worries after lowering its fiscal 2016 forecasts. The group said it predicts eurozone GDP to climb 1.6% this year, down from 1.7% last year and below a previous forecast of 1.7%. The commission blamed weaker forecasts on weakness in global growth and the risk and uncertainty associated with a potential Brexit referendum, in which voters will decide whether Great Britain leaves the European Union.
The Reserve Bank of Australia joined other global central banks in easing monetary policy after cutting rates for the first time in a year. The island nation's economy is facing record-low inflation and a stronger U.S. dollar that has pressured demand for its oil, basic materials and other local products internationally. Its cash rate target was cut to a new low of 1.75%. The chances of a rate cut were over 50%.
Crude oil was also sharply lower for a second day ahead of weekly inventory data that will be released after the closing bell. Oil has pulled back as fears over a supply glut and growing production returned after a surge of nearly 20% in April. West Texas Intermediate was down 3% to $43.45 a barrel.
The non-cyclical consumer sector was the only one in the green on Tuesday. CVS Health (CVS) - Get Report led gains in the sector after beating quarterly expectations and providing upbeat fiscal 2016 guidance. The pharmacy chain reported first-quarter adjusted earnings of $1.18 a share, 2 cents above estimates, while revenue surged nearly 19% to $43.2 billion thanks to two acquisitions last year. CVS expects adjusted earnings between $5.73 and $5.88 a share for the full year, meeting forecasts of $5.82.
A number of car manufacturers were in the red after April sales figures rebounded from March at a weaker-than-expected pace. Ford (F) - Get Report was lower after reporting a 12% decline in car sales, offset slightly by a nearly 15% surge in truck sales. Overall sales in the U.S. at Ford rose 4% to 231,316 units. However, analysts had expected a far-stronger 6.5% gain in sales.
General Motors (GM) - Get Report was also lower after reporting a 3.5% decline in overall sales compared to an expected 3% drop. Cadillac was its worst-performing brand, seeing sales slump nearly 30%.
Meanwhile, Fiat Chrysler (FCAU) - Get Report enjoyed its strongest April in 11 years as sales of SUVs and pickup trucks spiked. Overall unit sales jumped 6%, in line with analysts' estimates, driven by a 12% increase in truck sales.
American International Group (AIG) - Get Report fell after swinging to a first-quarter loss. The insurance giant suffered from a poor performance in hedge funds and other market-sensitive investments. This marked the third straight quarter in which AIG's hedge fund investments endured losses.
UBS (UBS) - Get Report pressured the financials sector after weakness in its wealth-management and investment businesses contributed to a sharp decline in quarterly net profit. The Swiss bank reported net profit of 707 million Swiss francs, down from 1.98 billion francs a year earlier. Analysts had expected net profit of 1.02 billion francs. The bank blamed "negative market performance [and] substantial volatility" for its underperformance.
Pfizer (PFE) - Get Report added 3.1% after besting first-quarter estimates and boosting its full-year outlook. The drugmaker expects fiscal 2016 earnings of at least $2.38 a share, up from a previous range of $2.20 to $2.30 a share. Pfizer earned 67 cents a share in its recent quarter, 13 cents above consensus.
Biogen (BIIB) - Get Report was on watch after announcing plans to spin off its haemophilia business into a separate publiclybtraded company. The biotech company plans to complete the spinoff by the end of the year at the earliest. Biogen will continue to manufacture key drugs Eloctate and Alprolix, which are housed in the haemophilia business, for around three to five years.
"We believe the transaction narrows the company's strategic focus, yet does little to bridge its maturing core franchise in MS (which lacks near-term catalysts) with its early-stage pipeline bets," said Jack Mohr and Jim Cramer, portfolio managers of Action Alerts PLUS Charitable Trust Portfolio, which owns Biogen. "Additionally, we are disappointed by the structure of the deal, as management all but acknowledged it was unable to find a buyer for its hemophilia assets."
