By Anora Mahmudova and Barbara Kollmeyer, MarketWatch
Alcoa unofficially kicks off earnings season with
weaker-than-expected results
U.S. stocks traded firmly lower on Tuesday as disappointing
results from aluminum giantAlcoa Inc. set the tone for the broader
market as the third-quarter earnings season gets under way this
week.
Shares of Alcoa (AA) dropped more than 9% in early trade, and
were on track for their worst daily drop in about five years,
according to FactSet data.
A retreat in oil prices also weighed on energy and materials
stocks.
The S&P 500 index fell 16 points, or 0.8%, to 2,147, with
all of its main sectors trading lower. Health-care and materials
sector were leading decliners, down nearly 1.5%.
The Dow Jones Industrial Average dropped 120 points, or 0.7%, to
18,208, with Visa Inc.(V) and Intel Corp(INTC) leading losses.
Meanwhile, the Nasdaq Composite Index fell 40 points, or 0.8%,
to 5,288, dragged down by heavy losses in biotech stocks. The
iShares Nasdaq Biotechnology ETF (IBB) was down 2.5%.
"Today's slump in stocks is mostly due to a retreat in oil and
commodities in general, as well as disappointing earnings from
Alcoa," said Ryan Larson, head of equity trading at RBC Global
Asset Management.
Some analysts also pointed out that rising expectations for a
rate increase in December are pushing up the dollar as well as
Treasury yields.
The dollar, as measured by the ICE U.S. Dollar Index rose 0.4%
to 97.27, from 96.92 seen late in New York on Monday.
Expectations for a rate increase at the end of the year also
pushed up the yields on the 10-year Treasurys to 1.77%, the highest
in four months.
"This [dollar strength] is starting to make life difficult for
U.S. stocks, but hopefully earnings season will jolt the S&P
500 out of its current grinding range," said Chris Beauchamp, IG's
chief market analyst, in a note to investors. The ICE U.S. Dollar
Index , a gauge of six rival currencies, gained 0.5% at
97.4660.
The pound marked fresh losses after media reports of leaked
government papers that predict the country stands to lose GBP66
billion ($81.1 billion) a year in tax revenue in the event of a
clean break with the European Union, or a "hard Brexit."
Opinion:Is this 'bone-chilling' indicator really saying 'sell'
stocks?
(http://www.marketwatch.com/story/is-this-bone-chilling-indicator-really-saying-sell-stocks-2016-10-11)
West Texas Intermediate crude futures pulled back slightly,
trading at $51.28 a barrel
(http://www.marketwatch.com/story/oil-prices-hover-near-highs-supported-by-view-opec-deal-may-happen-2016-10-11)
on Tuesday, hovering near its highest level since July 15, 2015.
Oil prices slipped after the International Energy Agency said
production from the Organization of the Petroleum Exporting
Countries rose to record highs in September.
(http://www.marketwatch.com/story/opec-oil-production-rose-to-record-highs-iea-2016-10-11)
On Monday, oil rallied on bullish comments from Saudi Arabia's
energy minister and Russian President Vladimir Putin. Major oil
producers are meeting in Istanbul to try to lay the ground for a
deal to cap production. Goldman Sachs warned clients that if a
production deal isn't reached in Vienna next month, oil prices
could plunge to $43 a barrel
(http://www.marketwatch.com/story/why-goldman-sees-oil-dropping-to-43-if-opec-cant-get-a-deal-done-this-time-2016-10-11).
(http://www.marketwatch.com/story/why-goldman-sees-oil-dropping-to-43-if-opec-cant-get-a-deal-done-this-time-2016-10-11)
(http://www.marketwatch.com/story/is-this-bone-chilling-indicator-really-saying-sell-stocks-2016-10-11)Economic
reports and Fed speakers: There is no major economic data on tap
Tuesday. Speaking in Australia Tuesday, Federal Reserve of Chicago
President Charles Evans said the U.S. economy is on a sound footing
and he wouldn't be surprised by December interest-rate hike, Dow
Jones Newswires reported.
Minneapolis Fed President Neel Kashkari will speak at Bethel
University on "Too big to fail" at 11 a.m. Eastern Time.
Stocks to watch:Yum! Brands Inc. (YUM) shares rallied 3.3% after
it outlined plans to boost growth at its fast-food restaurants once
the sale of units it owns in China are completed on Oct. 31. The
owner of KFC, Pizza Hut and Taco Bell said it was reducing capital
expenditures
(http://www.marketwatch.com/story/yum-brands-unveils-plans-to-drive-growth-after-separating-china-business-2016-10-11)
to $100 million by 2019 from a pro forma of $500 million in
2015.
(http://www.marketwatch.com/story/what-to-look-for-in-alcoas-earnings-2016-10-10)Read:
Earnings recession expected to extend to sixth straight quarter
(http://www.marketwatch.com/story/5-things-to-expect-this-earnings-season-2016-10-07)
Shares of Twitter Inc.(TWTR) rose 1.7%, after plunging 12% on
Monday following a Bloomberg report said top bidders for the social
network had dropped out.
Read:Twitter is the new Yahoo, so expect a long and bumpy ride
(http://www.marketwatch.com/story/twitter-is-the-new-yahoo-so-expect-a-long-and-bumpy-ride-2016-10-10)
(http://www.marketwatch.com/story/twitter-is-the-new-yahoo-so-expect-a-long-and-bumpy-ride-2016-10-10)Samsung
Electronics Co.(005930.SE) shares tumbled 8% in South Korea on
Tuesday. The company has permanently halted the production and sale
(http://www.marketwatch.com/story/samsung-kills-off-galaxy-note-7-smartphone-after-botched-recall-2016-10-11)
of its Galaxy Note 7, amid reports of phones exploding and catching
fire.
Apple Inc.(AAPL) shares rose 2%, after hitting their highest
level of 2016 Monday after one analyst said the iPhone maker could
sell millions of its own phones
(http://www.marketwatch.com/story/apple-could-sell-another-15-million-iphones-because-of-samsungs-note-7-explosions-2016-10-10)
on back of Samsung's woes.
Illumina Inc.(ILMN) shares cratered by 25% and were on track for
the worst daily loss in five years, according to FactSet data,
after the biotech company issued a revenue warning late Monday.
Other markets: European stocks
(http://www.marketwatch.com/story/luxury-stocks-light-up-in-europe-but-oil-shares-lose-ground-2016-10-11)
saw gains for luxury stocks, but losses for oil-related names. In
Asia, the Nikkei rose nearly 1% on a weaker yen.
Gold prices slipped marginally, down $3.70 to $1,256.80 an
ounce. Meanwhile, the yield on the 10-year Treasury note rose to
1.78%--its highest level in more than four months.
(END) Dow Jones Newswires
October 11, 2016 10:41 ET (14:41 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.