GE shares slide after disclosure of SEC probe
The S&P 500 and the Nasdaq retreated from record territory Wednesday as technology stocks came under pressure. However, the Dow bucked the trend to trade marginally higher on the back of strong financial shares.
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What are the main benchmarks doing?
The Dow Jones Industrial Average was the only index to firmly trade higher, rising 68 points, or 0.3%, to 26,278, with shares of Goldman Sachs Group Inc. (GS) and JPMorgan Chase & Co. (JPM) adding a combined 40 points to the blue-chip average's gains. The S&P 500 index shed a point to 2,838 while the Nasdaq Composite Index was off 38 points, or 0.5%, to 7,422.
All three equity benchmarks set fresh all-time intraday highs near the start of trade but couldn't maintain their momentum. On Tuesday, the S&P 500 and Nasdaq notched all-time closing highs again (http://www.marketwatch.com/story/dow-futures-rally-100-points-as-investors-move-past-shutdown-worries-to-focus-on-earnings-2018-01-23), while the Dow edged back from its record close hit on Monday.
The three equity gauges are up between 6% and 8.1% so far in 2018, adding to last year's sizable gains as investors cheer the expanding U.S. economy and growth in corporate profits. However, the market's stellar gains have prompted fears of extended valuations.
What's driving the markets?
Stronger-than-expected corporate earnings have buoyed appetite for equities that have mostly been trading in record territory in January on the back of pro-growth policies, adding to stellar gains from 2017.
Wall Street investors also focused on comments from Treasury Secretary Steven Mnuchin, who said President Donald Trump's administration supports "bilateral trading agreements," saying "a weaker dollar is good for trade." The U.S. dollar , which declined 10% last year, was trading at a fresh three-year low.
Read:Don't be so surprised by Mnuchin's endorsement of a weak dollar (http://www.marketwatch.com/story/dont-be-so-surprised-by-mnuchins-endorsement-of-a-weak-dollar-2018-01-24)
A weaker dollar can be a boon for multinational companies offering products and services abroad on price competitiveness.
Mnuchin's comments also helped push up yields on the 10-year Treasury note because a weaker dollar can undercut appetite for government paper. The 10-year yield was at 2.66% in recent trade, its highest since April 2014. At the same time, rising yields help bolster the businesses of financial firms, lifting interest income.
What are strategists saying?
"Above all else, earnings are doing well and revenue growth is solid to strong," said Quincy Krosby, chief market strategist at Prudential Financial. "The earnings guidance [from company executives] has been positive and the global economy continues to strengthen. This is all good for the companies," she said.
"The S&P 500 really is up more than 6% so far this month and shows no sign of abatement," said Voya Investment Management strategists Doug Coté and Karyn Cavanaugh in a note.
"What could possibly go wrong? Well, one risk to the market could be global trade," they added, noting that President Trump late Monday approved tariffs (http://www.marketwatch.com/story/first-solar-shares-jump-8-after-white-house-oks-tariffs-on-solar-panel-imports-2018-01-22) on imports of solar panels and washing machines.
For historical perspective, John Higgins, chief markets economist at Capital Economics, noted that Shiller's cyclically adjusted price/earnings ratio for the S&P 500 has soared to 34, slightly higher than where it was right before the "Great Crash" in the 1920s. "Nonetheless, the CAPE remains well below its all-time high of just above 44, which it reached in December 1999, before the dot com bubble burst," he said.
Which stocks look like key movers?
Shares in Qualcomm Inc.(QCOM) traded 1% lower after the chip company was hit with a $1.2 billion antitrust fine by the European Union (https://www.wsj.com/articles/eu-to-fine-qualcomm-over-exclusivity-payments-to-apple-1516783685?mod=mktw). The EU said Qualcomm made illegal payments to Apple Inc.(AAPL) for exclusively using its chips in iPhones and other products. Apple shares were also off 1%.
General Electric(GE) slid 2.3% (http://www.marketwatch.com/story/ges-stock-turns-lower-after-disclosure-of-sec-probe-into-insurance-reserve-increase-2018-01-24) after it announced that the Securities and Exchange Commission was probing the process that led to a sizable increase in its insurance reserves (http://www.marketwatch.com/story/ge-shocks-market-with-multibillion-dollar-loss-in-legacy-reinsurance-business-2018-01-16) last week. The industrial conglomerate also reported weaker-than-expected quarterly results (http://www.marketwatch.com/story/ges-stock-surges-despite-surprise-loss-and-revenue-miss-as-power-and-oil-gas-revenue-beats-2018-01-24) but offered a rosier revenue projection for its power and oil-and-gas business.
Comcast Corp.'s stock (CMCSA) was down 1.3% despite reporting that its earnings were boosted by its broadband business. It also announced plans to repurchase $5 billion in stock in 2018.
Puma Biotechnology Inc.'s shares (PBYI) slumped by 27% after its price target was lowered, notably by J.P. Morgan Chase, as the company said a European Medicines Agency committee completed a negative vote for its breast cancer therapy neratinib (http://www.marketwatch.com/story/puma-biotech-shares-plummet-after-concerning-turn-in-europe-2018-01-24).
Shares of United Technologies Corp.(UTX) rose 0.8% following fourth-quarter results (http://www.marketwatch.com/story/united-technologies-profit-dented-by-tax-charge-2018-01-24).
Texas Instruments Inc.(TXN) declined 7.7% after the chip company delivered in-line results and a modest outlook (http://www.marketwatch.com/story/texas-instruments-shares-fall-on-in-line-results-modest-outlook-2018-01-23) late Tuesday.
United Continental Holdings Inc.(UAL)fell 12% after the airline posted earnings (http://www.marketwatch.com/story/united-stock-rises-after-fourth-quarter-earnings-beat-2018-01-23) late Tuesday.
Ford Motor Co.(F)results are due after close of trade. Shares were up about 0.2%.
What are other assets doing?
European markets were mostly lower while Asian stocks have been a mixed bag.
Gold futures were up more than 1%, while oil futures (http://www.marketwatch.com/story/natural-gas-soars-with-the-leap-setting-off-a-trading-halt-2018-01-24) were slightly firmer.
What economic data are in focus?
The U.S. IHS Markit flash services PMI fell to 53.3 in January, while those for manufacturing rose to 55.5 in January. A reading of at 50 or better indicates expanding activity.
Existing-home sales hit a 5.57 million seasonally adjusted annual rate (http://www.marketwatch.com/story/existing-home-sales-fizzle-in-december-as-supply-hits-an-18-year-low-2018-01-24) in December, the National Association of Realtors said Wednesday, coming in below the consensus forecast for a 5.73 million rate.
Check out:MarketWatch's Economic Calendar (http://www.marketwatch.com/economy-politics/calendars/economic)
--Victor Reklaitis contributed to this report.
(END) Dow Jones Newswires
January 24, 2018 12:53 ET (17:53 GMT)
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