Stocks Lower on Disappointing Earnings
Oil prices ease as dollar strengthens
By Riva Gold and Daniel Huang Updated Oct. 11, 2016 2:47 p.m. ET
U.S. stocks fell Tuesday as disappointing earnings results damped investor hopes for a rebound in corporate performance.
A pair of companies led declines after announcing weaker-than-expected results. Alcoa Inc., reporting its last earnings before splitting, said earnings and revenue grew less than expected and cut revenue targets, citing short-term industry challenges. Shares of the aluminum giant fell 11%.
Shares of Illumina Inc. tumbled 26% after the gene-sequencing company Monday cut its revenue guidance. The drop weighed on the S&P 500 health-care sector, down 2.5%, making it the biggest declining sector in the index.
The Dow Jones Industrial Average fell 253 points, or 1.4%, to 18076. The S&P 500 lost 1.6% and the Nasdaq Composite fell 1.9%. The Nasdaq Biotechnology Index fell 4.4%, wiping out Monday’s gains.
Companies in the S&P 500 are expected to report an earnings decline for the sixth consecutive quarter, according to analysts polled by FactSet.
“We’re hoping to see improvement this earnings season. It’s not where you want to start,” said Jeff Carbone, co-founder of Cornerstone Financial Partners.
Energy firms in the S&P 500, which have dragged down corporate earnings in recent quarters, fell 1.4%.
U.S. crude oil fell 1.2% to $50.73 a barrel following a report from the International Energy Agency suggesting global supplies rose in September.
Oil prices had hit a one-year high in the previous session on news that Russia would support the Organization of the Petroleum Exporting Countries’ attempt to cut its collective output.
Tuesday’s decline in commodity prices also came as the WSJ Dollar Index, which measures the dollar against a basket of 16 currencies, rose 0.8%.
Russia said Monday it would support OPEC’s attempt to cut output. ENLARGE
Russia said Monday it would support OPEC’s attempt to cut output. Photo: Getty Images
Analysts attributed dollar’s strength to rising expectations for higher U.S. interest rates this year.
The Federal Reserve in September acknowledged a rate increase was likely before the end of the year, and recent comments from Fed officials and U.S. economic data have heightened investors’ expectations for a move in December.
Federal Reserve of Chicago President Charles Evans said Tuesday the U.S. economy is on a sound footing and a December rate increase “could be fine.” The Fed is scheduled to release the minutes from its September meeting on Wednesday.
S&P 500 Leaders and Laggards - 1 Day
Fed-fund futures, used by investors to bet on central-bank policy, showed investors currently price a roughly 65% chance of higher rates by the end of the year, according to CME Group.
Analysts also attributed some of the dollar’s strength to investors’ perception that Donald Trump was falling behind in the U.S. presidential race after House Speaker Paul Ryan cut the cord to the Trump campaign Monday.
“We think a December rate rise is pretty likely now,” said Mike Bell, strategist at J.P. Morgan Asset Management. The only things that could derail that are a significant negative reaction in markets to the U.S. election or a marked deterioration in U.S. economic data, both of which seem increasingly less likely now, he said.
The yield on the 10-year Treasury note rose to 1.757% as the U.S. bond market reopened from a holiday.
Elsewhere, the Stoxx Europe 600 swung between small gains and losses and closed down 0.5%. The technology sector fell, after a steep drop in shares of Samsung Electronics Co. dragged down Korea’s Kospi index.
The electronics company’s stock fell over 8% after it halted distribution of its Galaxy Note 7 smartphone because of issues with batteries overheating and said Tuesday it would permanently discontinue production and sales of its embattled smartphone.
In other currency trade, the British pound fell 2% to $1.2115, bringing losses this year close to 18%.
“The market is now assuming that the U.K. is going to go ahead with a hard Brexit, prioritizing control of immigration over access to the single market,” Mr. Bell said.
London’s FTSE 100 index touched its highest level in at least 20 years Tuesday as the falling currency lifted the export-heavy index.
The euro was down 0.8% against the dollar at $1.1053, even after data showed a pickup in German economic sentiment at the start of the fourth quarter.
Earlier, Japan led gains in Asian markets as a weaker yen boosted shares of exporters, helping lift the Nikkei Stock Average up 1%.
Shares in Shanghai added 0.6%, while Hong Kong’s Hang Seng Index fell 1.3% amid a steep fall in property stocks.
—Aaron Kuriloff, Kenan Machado and James Glynn contributed to this article.
Write to Riva Gold at
riva.gold@wsj.com and Daniel Huang at
dan.huang@wsj.com