US open: Stocks head south ahead of FOMC
US stocks started the session weaker on Tuesday as investors played it safe ahead of the US central bank's policy meeting on the next day and amid a downdraft in shares of internet giant Alphabet.
As of 1540 BST, the Dow Jones Industrial Average was down 0.11% at 26,525.43, while the S&P 500 was 0.25% weaker at 2,935.77 and the Nasdaq Composite was trading 0.81% softer at 8,095.72.
Nevertheless, the S&P 500 had reached another record high during the previous session on the back of some better-than-expected corporate results.
Disappointing Chinese factory PMI data overnight and weaker European stock markets were also weighing on sentiment.
In other news, the Federal Reserve was due to kick-off its two-day policy meeting today and although no changes in policy were anticipated there was an ongoing debate as to whether a rate cut was in the cards for later in the year.
Polls by Reuters and Bloomberg showed few economists anticipating such a move, but Fed funds futures were pricing in just under 70% odds of a cut at the December FOMC.
On the corporate front, Google parent company Alphabet reported a slowdown in its ad revenue growth in its first quarter results which disappointed analysts and sent its stock tumbling 7% in after-hours trading on Monday.
In terms of revenue, Google's advertising sales which is its most important business, stood at $30.7bn, coming short of the estimated $31.4bn. This has proven a slowdown in its ad sales growth which rose 15%, down from 24% a year ago.
George Salmon, equity analyst at Hargreaves Lansdown said on Monday: "Another EU fine won’t have washed well with investors, but in reality it’s not the cheque on its way to Brussels that’s causing the shares to drop. Instead, it’s a nasty combination of growth in traffic to Google ads slowing and lower revenue per click from those ads that’s upset the market. The results come after Amazon also reported weaker trends in its advertising business just last week. Longer-term, however, there’s still plenty of reasons to be positive on the stock."
Going the other way, General Electric shares climbed 5.04% after revealing a smaller-than-expected profit and earnings drop, while Pfizer was up 2.22% in early trade after raising its full-year guidance.
Shares in Merck were 1.16% ahead after raising the top-end of its EPS and revenue guidance and General Motors shares lost 3.19% in early trade as fears surrounding its market share offset an earnings beat.
Mastercard was ahead 2.87% after beating estimates for quarterly profit thanks to a boom in online shopping, while McDonald's ticked up 0.50% in early trade on the back of a bacon-driven sales jump.
Apple will update investors after the close, where Wall Street anticipates the tech giant will reveal an EPS of $2.36 versus the $2.73 recorded a year ago, whilst revenues were also seen declining from $61.1bn last year to $57.4bn.
On the data front, national home prices increased 4% in February, according to the latest reading on the S&P CoreLogic Case-Shiller home price index.
The 10-City Composite rose 2.6% year-on-year, down from 3.1% in January, while the 20-City Composite posted a 3% annual gain, also down from the 3.5% posted a month earlier.
"Home sales drifted down over the last year except for a one-month pop in February 2019," said David Blitzer, managing director and chairman of the index committee at S&P Dow Jones Indices.
"Sales of new homes, housing starts, and residential investment had similar weak trajectories over the last year."
Meanwhile, a closely-followed leading indicator for the health of the US housing market perked up last month.
The National Association of Realtors' Pending Home Sales index jumped by 3.8% month-on-month in March to reach 105.8 (consensus: 1.0%), with contract signings growing by 1.2% in comparison to a year ago.
"We are seeing a positive sentiment from consumers about home buying, as mortgage applications have been steadily increasing and mortgage rates are extremely favourable," said NAR chief economist Lawrence Yun.
Elsewhere, Consumer confidence bounced back in April, suggesting the economy was likely to keep growing solidly throughout the summer.
The consumer confidence index rose to 129.2 from 124.2, according to the Conference Board, indicating that consumers seem to feel pretty good about the state of the US economy over the next six months.
Lastly, manufacturing activity in the area around Chicago, which is heavily geared towards the fortunes of jetmaker Boeing, slowed sharply in April.
Market News International's factory sector Purchasing Managers' Index dropped by 6.1 points to 52.6, missing economists' forecasts for a reading of 59.0 and hitting its lowest level since January 2017.
Significantly, a gauge of new orders dropped below its average level for the last 12 months and the pace of output growth weakened to a level not seen since May 2016.
"This was a disappointing start to the second quarter, with more firms cutting back on both production and employment against a backdrop of softer domestic demand and the global slowdown," said Shaily Mittal, Senior Economist at MNI.
Mittal added: "Most Barometer components have dived below their respective 12-month averages, pointing towards greater business uncertainty among firms."