Yahoo Finance Stocks decline as investors digest Fed commentary, turn attention to earnings
Stocks declined Thursday as investors refocused on corporate earnings results and U.S.-China trade negotiations, a day after a Federal Reserve policy decision.
The S&P 500 (^GSPC) fell 0.21%, or 6.22 points, as of market close. The Dow (^DJI) fell 0.46%, or 122.35 points, while the Nasdaq (^IXIC) slipped 0.16%, or 12.87 points.
U.S. equities extended losses after Wednesday’s declines, following the Fed’s latest monetary policy decision.
The decision to keep key borrowing rates unchanged at a band of between 2.25% to 2.5% was widely expected by investors. However, Fed Chairman Jerome Powell jarred markets by suggesting that neither a hike nor a rate cut was likely in the near-term— even as inflation signals have moved further away from the central bank’s 2% target.
U.S. Treasury yields, which move inversely to prices, recovered after falling in the immediate aftermath of the release of the Fed’s policy statement. The yield on the 10-year Treasury note rose 3.6 basis points to 2.547%, with the spread between it and the 2-year Treasury yield at 20.2 basis points as of Thursday afternoon.
The Bank of England held its own key interest rate at 0.75% on Thursday, which had been widely expected. The central bank upgraded its growth outlook for the U.K this year to 1.5%, from the 1.2% pace seen in February. It cited a first-quarter boost to growth coming from inventory-building as businesses stockpiled ahead of Brexit.
With the latest key monetary policy decisions in the rearview mirror, investors are turning their attention toward the latest batch of corporate earnings reports, economic data releases and trade talk updates.
U.S. Treasury Secretary Steven Mnuchin and Trade Representative Robert Lighthizer met with Chinese negotiators in Beijing this week, looking to further trade talks as the two sides work toward a deal.
Mnuchin said in a tweet that the meetings were “productive.” Further negotiations are set to resume on May 8, with the Chinese delegation returning to Washington, D.C.
According to a report from CNBC citing unnamed sources, an announcement of a U.S. trade deal with China could come as soon as next Friday.
Meanwhile, domestic crude oil prices (CL=F) fell as much as 4% Thursday amid ongoing concerns of a supply glut. Investors continued to digest news from Wednesday that U.S. crude stockpiles rose by more than six times the forecast, as well as reports that Russia missed a planned target for price-boosting output cuts in April. On Thursday, the Trump administration also ceased providing waivers to several countries that previously allowed them to continue buying Iranian crude, stirring up further uncertainty over the direction of the oil market.
STOCKS
Under Armour (UAA) reported first-quarter results that beat consensus expectations and raised profit guidance for the full year. Adjusted earnings were 5 cents on net revenue of $1.2 billion, exceeding expectations for breakeven earnings on revenue of $1.18 billion.
The company reiterated its full-year guidance to see revenue growth of between 3% and 4% and raised its earnings guidance to see earnings per share of between 33 cents and 34 cents per share, up from the 31 cent to 33 cent band the company saw previously. However, Under Armour continues to see weakness in its home market, with North American segment revenue down 3% to $843 million in the first quarter.
Dunkin’ Brands (DNKN), which owns Dunkin’ Donuts and Baskin-Robbins, exceeded expectations for first-quarter earnings and sales, though guidance came up lighter than expected. First-quarter adjusted earnings were 67 cents on revenue of $319.1 million, above the 62 cents per share expected on revenue of $312.6 million.
The company sees full-year adjusted profit in the range of $2.94 to $2.99 per share, with the midpoint below consensus estimates of $2.97. Baskin-Robbins was a drag on comparable same-store sales growth, but Dunkin’ Donuts saw same-store sales growth of 2.4% and 2.9%, respectively, in its domestic and international segments.
Tesla (TSLA) has set out to raise $2 billion through debt and new public offerings of its shares after the company posted a lower-than-expected cash balance at the end of its last reported quarter and management changed its tune about its views on a new capital raise.
According to new securities filings, Tesla is offering $1.35 billion in convertible senior notes due in 2024, and is also offering about 2.7 million shares of common stock totaling about $650 million. CEO Elon Musk has also signaled he would purchase up to 41,896 shares of common stock for about $10 million. Tesla exited the first quarter with $2.2 billion in cash and cash equivalents on the balance sheet, a $1.5 billion reduction versus the end of 2018.
ECONOMY
U.S. productivity jumped 3.6% in the first quarter of 2019, marking the fastest pace of increase since 2014, according to a preliminary reading from the Bureau of Labor Statistics. Over the past 12 months, productivity has climbed 2.4%, or the largest rate of increase since 2010. However, the increase in productivity for the fourth quarter was downwardly revised to 1.3%, from 1.9% previously. The uptick in productivity during the first quarter was accompanied by an unexpected decline in unit labor costs, which fell 0.9% in the first quarter, versus an expected gain of 1.5%.
Initial jobless claims rose more-than-expected for the week ending April 27, according to the Department of Labor’s latest release. New unemployment claims rose 230,000 for the week, higher than the 215,000 expected and flat from the week prior. Continuing unemployment claims for the week ending April 20 rose to 1.671 million, outpacing an expected increase to 1.66 million, according to consensus expectations.
Factory orders increased in March following two months of declines, according to the Commerce Department’s final reading for the period. Orders rose a better-than-expected 1.9%, versus an increase of 1.6% expected. Meanwhile, new orders for manufactured durable goods, or products intended to last three years or more, increased 2.6%, down from the 2.7% increase seen in the previous print. Non-defense capital goods orders, excluding aircraft, were upwardly revised to see a gain of 1.4%, from 1.3% seen previously. The segment serves as a closely watched proxy of business investment.
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Emily McCormick is a reporter for Yahoo Finance. Follow her on Twitter: @emily_mcck
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