US close: Financials and energy surge, but IBM and treasuries drag
Wall Street closed on Wednesday as it opened, on a mixed note, with solid earnings from banking giant Morgan Stanley and stronger oil prices being offset by a struggling IBM weighing on the blue-chip index.
The Dow Jones Industrial Average closed down 38.56 points or 0.16% at 24,748.07, while the S&P 500 and Nasdaq both finished moderately higher, up 0.19% and 0.1%, respectively.
Stocks were pulled hither and thither by various factors, as US Treasures sold off by roughly three basis points, oil prices reached their highest levels since late 2014 as WTI crude rose more than 3% to $68.75 per barrel, while the dollar index gained 0.1% to 89.61. The dollar was helped by a weak pound and the greenback's largest single-day rally in over a month against its Canadian counterpart, bouncing off a near two-month low helped by a dovish Bank of Canada policy statement.
Shares in IBM, one of the deposed monarchs of the tech sector, were the main cause of the Dow's down-day as they finished down 7.5% creating a major drag for the Dow, after profit margins at 'Big Blue' shrank and underlying revenue flatlined in the first quarter, suggesting slow progress in its shift towards more profitable businesses.
Although IBM's revenue rose 5% to $19.1bn, a second quarter of growth after more than five years of declines, revenue was unchanged when adjusted for currency movements. Furthermore, adjusted gross profit margin declined to 43.7% from 44.5% the year before, while analysts had expected margins to widen to 45.1%. IBM attributed the drop to significant one-time charges. Pre-tax profit fell 20% to $1.1bn, undershooting analysts’ average forecast.
In other corporate news, Morgan Stanley posted a 40% rise in first-quarter profit, with revenue at a record level, thanks in part to a jump in trading revenue on the back of market volatility, sending its shares higher by 1.85%. Shares in the bank finished almost flat.
Airline United Continental stock climbed after its first-quarter earnings released overnight beat expectations.
Southwest Airlines was, surprisingly, up almost 3% in spite of the death of a female passenger on a flight from New York to Texas as debris from a blown jet engine smashed a window at 32,000 feet. The airline has now launched an investigation into the accident.
Emerson was up 1.43% after it announced it would buy Textron's tools and test equipment business for $810m. Textron was up 6.74% shortly after the bell.
Taking a macro view, the Federal Reserve's Beige Book reported economic activity across America remained at “a modest to moderate pace” in March and early April, no different from a year earlier, though one change was concerns about the White House's trade policy expressed by three-quarters of regions.
Overall wage growth was said to be modest, and price gains seen as moderate. Wage pressures “did not escalate,” the report said. Labor markets were seen as tight, with continued reports of labor shortages for high-skilled workers.
Among the Fedspeak on Wednesday, William Dudley, the outgoing New York Fed chief, said there "is still some distance to go" before monetary policy gets tight, with uncertainties over trade and the federal budget the main challenges for the FOMC's rate setters.
"Uncertainty about trade policy and the fact that we are now on an unsustainable fiscal path… have raised the longer-term risks."
After the US central bank hiked its rates target to 1.5-1.75%, Dudley said he viewed the neutral real interest rate to be around 1%, suggesting rates would need to rise to around 3% for monetary policy to reach a neutral level that is neither overly stimulative nor restrictive.
Dow Jones - Risers
Home Depot Inc. (HD) $179.85 2.82%
Caterpillar Inc. (CAT) $155.95 2.50%
Chevron Corp. (CVX) $123.83 1.96%
American Express Co. (AXP) $95.15 1.34%
Boeing Co. (BA) $341.00 1.27%
Exxon Mobil Corp. (XOM) $79.22 1.14%
Dowdupont Inc. (DWDP) $68.04 0.77%
Visa Inc. (V) $124.48 0.53%
Pfizer Inc. (PFE) $36.51 0.44%
Microsoft Corp. (MSFT) $96.44 0.39%
Dow Jones - Fallers
International Business Machines Corp. (IBM) $148.79 -7.53%
Johnson & Johnson (JNJ) $127.81 -2.03%
Nike Inc. (NKE) $66.20 -1.94%
Walt Disney Co. (DIS) $101.21 -0.95%
General Electric Co. (GE) $13.67 -0.94%
Unitedhealth Group Inc. (UNH) $236.44 -0.90%
Coca-Cola Co. (KO) $44.53 -0.86%
JP Morgan Chase & Co. (JPM) $109.32 -0.81%
Travelers Company Inc. (TRV) $136.48 -0.63%
Merck & Co. Inc. (MRK) $58.92 -0.59%
S&P 500 - Risers
Spectra Energy Corp. (SE) $11.91 9.57%
Intuitive Surgical Inc. (ISRG) $471.03 8.17%
Alcoa Corporation (AA) $59.40 7.94%
CSX Corp. (CSX) $61.01 7.85%
Devon Energy Corp. (DVN) $36.10 7.15%
Murphy Oil Corp. (MUR) $30.80 6.80%
Textron Inc. (TXT) $63.99 6.76%
First Solar Inc. (FSLR) $77.58 6.74%
Newfield Exploration Co (NFX) $27.89 5.88%
Freeport-McMoRan Inc (FCX) $19.18 5.62%
S&P 500 - Fallers
International Business Machines Corp. (IBM) $148.79 -7.53%
Applied Materials Inc. (AMAT) $54.73 -5.41%
Juniper Networks Inc. (JNPR) $24.38 -4.05%
Lam Research Corp. (LRCX) $203.77 -4.03%
Altria Group Inc. (MO) $61.50 -3.88%
Gap Inc. (GPS) $29.54 -3.21%
Citizens Financial Group, Inc. (CFG) $41.03 -3.16%
Mattel Inc. (MAT) $13.89 -3.07%
Comerica Inc. (CMA) $93.28 -2.94%
Xilinx Inc. (XLNX) $68.01 -2.69%