U.S. stocks ended slightly lower at the end of a choppy session on Wednesday amid mixed corporate earnings results and continued concerns of trade tensions and a potential return to a government shutdown.
The S&P 500 (^GSPC) fell 0.22% or 6.07 points, as of market close. The Communication Services sector led declines as video game-makers Take Two (TTWO) and Electronic Arts (EA) each delivered disappointing quarterly results, pulling peers including Activision Blizzard (ATVI) lower.
The Dow (^DJI) fell 0.08%, or 21.42 points, while the Nasdaq (^IXIC) slipped 0.36%, or 26.8 points.
Earnings season is still barreling ahead, with 71.7% of the S&P 500’s market capitalization having reported fourth-quarter results as of Wednesday morning. Earnings are beating by 3.4%, with 62% of companies exceeding their bottom-line estimates, Jonathan Golub, chief U.S. equity strategist for Credit Suisse, said in an email. This compares to 4.9% and 70% over the past three years.
Companies reporting results Wednesday include Eli Lilly (LLY), Boston Scientific (BSX), General Motors (GM) and MetLife (MET).
Meanwhile, President Donald Trump’s second State of the Union address Tuesday night provided few surprises for investors and primarily provided a platform for the president to restate his stances on U.S.-China trade, immigration policy and infrastructure.
“It was thin indeed for details on economic initiative going forward, unless you consider building a border wall and keeping up the trade fight with China as falling within that category,” Mark Hamrick, senior economic analyst at Bankrate.com, said in an email.
Trump also called for Republicans and Democrats to “join forces” to pass a bill to provide the $5.7 billion in funds he has called for to secure the southern border, while providing no signs of concessions for congressional Democrats who have so far blocked his funding. Congressional lawmakers have until February 15 to pass a measure to fund several major agencies to prevent the government from descending back into a partial shutdown.
Trump’s comments surrounding drug pricing reform – which had widely been anticipated ahead of the address – could carry more direct implications for the pharmaceutical industry. The president called for legislation to lower prices of pharmaceutical drugs in the U.S., saying, “It is unacceptable that Americans pay vastly more than people in other countries for the exact same drugs, often made in the exact same places.” These comments come as drug-makers have increased prices on hundreds of prescription medicines at the start of 2019.
He asked that Congress pass legislation “that finally takes on the problem of global freeloading and delivers fairness and price transparency for American patients.” The Trump administration has recently proposed ending a series of drug rebates that drug-makers pay to pharmacy benefit managers in programs like Medicare in a move aimed at deflating high list prices of many pharmaceuticals.
On Wednesday, Federal Reserve Chairman Jerome Powell will speak at a town hall meeting with educators at 5 p.m. ET in Washington, marking his first public comments after last week’s Federal Open Market Committee meeting and monetary policy decision. These will also be his first public statements since he met with Trump at the White House for dinner Monday to discuss recent economic developments and the growth outlook.
STOCKS: Snap posts narrower-than-expected losses, General Motors beats estimates
Snap (SNAP) posted a fourth-quarter loss per share of 4 cents, versus 7 cents anticipated by analysts, while revenue of $390 million came in $12 million ahead of expectations. The company’s userbase of 186 million daily active users was flat compared to the previous quarter – better than Wall Street’s expectations for a decline to about 184 million DAUs.
Disney (DIS) delivered stronger-than-expected quarterly earnings and revenue for the fiscal first quarter as the company articulated its focus on building out its direct-to-consumer platforms. Disney’s newly reported Direct-to-Consumer & International segment, which includes sports streaming platform ESPN+ and the soon-to-be-launched video streamer Disney+, posted an operating loss for the quarter. But Disney CEO Robert Iger said on a call with investors that DTC services are the company’s “number one priority” and that the investments the company is making “in both the technology side and in creating incremental content are all designed so that long-term this business will become an important part of Disney’s bottom-line.”
General Motors (GM) exceeded Wall Street’s expectations for fourth-quarter results on the top and bottom lines amid the automaker’s cost-cutting workforce reductions and higher truck sales. Adjusted earnings were $1.43 per share on revenue of $38.4 billion, exceeding expectations of $1.25 per share on revenue of $36.53 billion, according to Bloomberg data. The company also said it expects to post full-year earnings of between $6.50 to $7.00 per share, ahead of the average expectation of $6.27.
ECONOMY: U.S. trade deficit narrowed in November, delayed results show
The U.S. trade deficit in November narrowed to $49.3 billion, an 11.5% reduction from October’s revised $55.7 billion deficit. This was the first decline in the trade deficit after five consecutive months of increases. Consensus economists polled by Bloomberg had expected a $54 billion deficit for the month. Imports fell 2.9% in November to $259.2 billion, while exports declined 0.6% to $209.9 billion, according to a Commerce Department statement Wednesday. The release of November trade balance data was delayed due to the partial government shutdown.
