Earnings results and forecasts from Dow components dragged the blue-chip index lower on Tuesday, while S&P 500 and Nasdaq ended in the green because of other factors. Material stocks ensured that the S&P 500 could avoid its third-straight decline. The day was devoid of any major economic releases but for IMF raising the global economic growth estimate.
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The Dow Jones Industrial Average (:DJI) dropped 0.3% to 16,414.44. On the other hand, the Standard & Poor 500 (S&P 500) gained 0.3% to close at 1,843.80. The tech-laden Nasdaq Composite Index also finished in the green and jumped 0.7% to 4,225.76. The fear-gauge CBOE Volatility Index (:VIX) gained 3.5% to settle at 12.87. Composite volume on the New York Stock Exchange was 3.8 billion; about two stocks gained for every one that declined.
Markets were closed on Monday for Martin Luther King Day which meant Tuesday was the first trading session of the week. Benchmarks had a choppy run all through the day with the Dow swinging between meager and solid losses and Nasdaq moving between modest and decent gains. As for S&P 500, it moved between red and green territory.
It was earnings numbers that mostly provided direction to the Dow. However, performance results and forecasts were more of a disappointment. Dow components Verizon Communications Inc. (NYSE:VZ), The Travelers Companies, Inc. (NYSE:TRV) and Johnson & Johnson (NYSE:JNJ) dropped 1.3%, 1.7% and 1.1%, respectively, after announcing earnings results and forecasts.
Healthcare behemoth Johnson & Johnson reported fourth-quarter 2013 earnings (excluding special items) of $1.24 per share, ahead of the consensus estimate of $1.20 per share. However, the company’s 2014 earnings projection of $5.75 - $5.85 per share was below market estimates.
The Travelers Companies too reported earnings beat in its fourth quarter but margins were a worrying factor. The company reported lower underlying underwriting margins in some segments. Verizon tanked after reporting results and announcing that it will acquire Intel Corporation’s (NASDAQ:INTC) pay-television startup.
The S&P 500, however, secured a seat in the green, thanks to gains in the material sector. Materials Select Sector SPDR (XLB) gained 0.6% and led the gains among the S&P 500 industry groups. The upward move was largely aided by a 6.6% gain in The Dow Chemical Company (NYSE:DOW) after reports that Daniel Loeb, activist investor and hedge fund manager, has bought stake in the company.
Also, a rating and target price upgrade from JPMorgan helped Alcoa Inc. (NYSE:AA) move 6.8% higher. Among other gainers, Monsanto Company (NYSE:MON), Praxair Inc. (NYSE:PX) and PPG Industries Inc. (NYSE:PPG) improved 0.3%, 0.6% and 0.3%, respectively.
Separately, for the first time in about two years, the International Monetary Fund upped its global economic growth forecast. It forecasted 3.7% growth in the global economy this year, up by 0.1 percentage point from its October forecast. For 2015, IMF projected a 3.9% jump. IMF's chief economist Olivier Blanchard said: “The basic reason behind the stronger recovery is that the brakes to the recovery are progressively being loosened”.
This was the first trading session of the week and Dow was the only benchmark to start on a losing note. Incidentally, blue-chip index was the sole gainer last week, which was also its first weekly gain this year. The S&P 500 and Nasdaq closed the week with losses of 0.2% and 0.6%, respectively, but Dow rose 0.1%.
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