U.S. Bank Shares Fall, European Stocks Slide on Political Uncertainty

By Akane Otani and Mike Bird Features Dow Jones Newswires

Major stock indexes fell Tuesday, weighed by a slide in shares of banks and health-care companies.

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The Dow Jones Industrial Average lost 173 points, or 0.8%, to 20464. The S&P 500 fell 0.6% and the Nasdaq Composite lost 0.5%.

Stocks have faltered in recent weeks as a pickup in political uncertainty in both the U.S. and elsewhere drove investors into haven assets like gold and U.S. Treasurys.

More than 60 firms in the S&P 500 are expected to report earnings this week, according to FactSet, including several banks and industrial companies. Continued signs of corporate health will be key to stocks moving higher, analysts and investors say.

"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."

Bank stocks slid Tuesday 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 4.7%, wiping away about 72 points from the Dow industrials. The KBW Nasdaq Bank Index of leading U.S. commercial lenders lost 1.5%.

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Bank of America shares initially traded higher, but were recently down 1.4%, 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 3.4% after the company posted underwhelming sales in the latest quarter. Health-care stocks fell 1.3% 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 will be watching for not just solid earnings results but also a pick-up 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 1.6% against the dollar to $1.2762. 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

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)