US stocks closed lower on Wednesday as earnings weighed, with the losses more pronounced in the smaller cap sectors.
Although the latest official EIA oil inventories data showed a surprise drop in the oil supply glut, the positive effect on oil prices was short-lived, and so it was on the bourse too.
The S&P 500 market bellwether closed down 0.2% at 2139 and led by Edwards Lifesciences Corp (NYSE:EW) down 17.1% at $94.25 after a sales miss on its third quarter earnings.
The West Texas Intermediate, a gauge of US oil prices, was down 1.7% at $49.13 a barrel.
Even gains in new home sales ahead of a possible US rate hike in December and uncertainty thrown up by the US presidential and congressional elections in November, were not enough to send stocks north, as they were weighed down by mixed earnings reports, including the lacklustre accounts from the biggest US listed stock Apple Inc (NASDAQ:AAPL).
Meanwhile, there was no more word on a possible interest from Walt Disney (NYSE:DIS) in buying Twitter Inc (NYSE:TWTR). Instead, there was more bad news in the form of a shareholder lawsuit accusing Twitter CEO Jack Dorsey and other executives of concealing facts about Twitter’s slow user growth, even as they sold their personal stock holdings “for hundreds of millions of dollars in insider profits.”
The complaint, filed in California's federal court by shareholder Jim Porter, seeks to force Dorsey and others, including former CEO Dick Costolo and founder and Board member Evan Williams, to repay profits they made since February 2015
Twitter shares closed up 0.2% at $$17.29 but ebbed after hours.
The S&P Midcap 400 closed down 0.5% at 1514 and led by Dycom Industries (NYSE:DY) down 14.4% at $72.50.
Weakness in Dycom Industries was tied to reports Google Fiber cut its expansion plans.
The S&P Smallcap 600 was down 0.7% at 727 and led by Diplomat Pharmacy Inc (NYSE:DPLO) down 12.4% to $25.31 after news the company's president and also its chief financial officer will be out before the end of the year.
But boding well for the Thursday session, Tesla Motors (NASDAQ:TSLA) unexpectedly swung to a profit in the third quarter, sending its shares zooming higher after hours. The company said its net income was $21.9mln in the three months ending in September, from a loss of $229.9mln in the same period in 2015. Revenues soared by 145% to $2.3bn.
Tesla shares were 5.7% higher at $213.75 after hours.
Early trading
US stocks pared losses in early trading on Wednesday after a surprise drop in crude stockpiles from the world’s biggest economy and new home sales unexpectedly rose in September.
US crude inventories fell by 553,000 barrels to 468.2m barrels in the week to October 21, according to data released by the US Energy Information Agency - opposite of analysts’ expectations for an increase of 1.17mln barrels and marks the seventh time out of the past eight weeks that stockpiles have dropped. However, US oil futures were flat at $49.97.
Meanwhile, sales of new homes unexpectedly climbed last month, driven by strength in the Northeast and the US labour market and continued support for the housing market from historically low mortgage rates.
Sales of newly built homes rose 3.1% in September to an annualised pace of 593,000 units, the Commerce Department. Economists had forecast a 1.5% decline to an annualised pace of 600,000.
But the overall sentiment in the stockmarket was negative and the S&P 500 ticker bellwether was down 0.2% to 2138.
Largest-listed stock Apple (NASDAQ:AAPL) saw its shares drop 3.1% to $114.62 after its projection that it will return to sales growth failed to generate enthusiasm among investors.
US’s largest domestic carrier Southwest Airlines’ (NYSE:LUV) shares nosedived 11.3% to $37.23 after the group reported a bigger than expected drop in revenues and profits for the quarter before the bell.
But the airline was only the second-worst performer on the S&P 500. The top loser was Edwards Lifesciences Corp (NYSE:EW), down 13.3% to $98.60 after a sales miss on its third quarter earnings earlier.
Although Apple was only the tenth biggest faller on the S&P 500 its magnitude – worth 3% of the stockmarket – was enough to sour the session.
The S&P Midcap 400 was down 0.4% to 1516 and led by Dycom Industries (NYSE:DY) down 12.6% to $74.00.
Weakness in Dycom Industries was tied to reports Google Fiber cut its expansion plans.
Tuesday, Google Fiber said in a blog post "In terms of our existing footprint, in the cities where we’ve launched or are under construction, our work will continue. For most of our 'potential Fiber cities' — those where we’ve been in exploratory discussions — we’re going to pause our operations and offices while we refine our approaches."
The S&P Smallcap 600 was down 0.2% at 730 and led by Diplomat Pharmacy Inc (NYSE:DPLO), down 12.9% to $25.16 after news the company's president and also its chief financial officer will be out before the end of the year.
The specialty pharmacy said Tuesday that President Gary Kadlec will retire in December. He will be replaced by company executive Paul Urick next month. Sean Whelan will step down as CFO and director on Dec. 31.
Mizuho analyst Ann Hynes says that the abrupt executive shakeup just a week before the company releases third-quarter earnings is "worrisome."
Diplomat Pharmacy Inc., based in Flint, Michigan, runs medication management programs for complex, chronic conditions like cancer, hepatitis and multiple sclerosis.
As for rumours of Walt Disney’s (NYSE:DIS) interest in buying Twitter (NYSE:TWTR)? So far no meat on the bone means the micro-blogging site’s shares are up a modest 0.7% to $17.38.
Pre-Open
US stocks are likely to open lower on Wednesday after the bourse’s biggest stock Apple (NASDAQ:AAPL) earnings underwhelmed and other stocks did too overnight.
The S&P 500 is indicated opening 0.3% lower.
Apple said late Tuesday that annual sales fell to $216bn in the fiscal year ending September 30. Although better than many analysts expected it still represented a drop from a record $234bn a year earlier.
The report suggested people aren't buying as many iPhones as they did last year. Many analysts have raised concerns that the global smartphone market has become saturated. Apple shares dropped 3% after hours Tuesday and were down 2.9% at $114.83 pre-market.
Meanwhile, Chipotle Mexican Grill Inc (NYSE:CMG) shares sank faster than teeth into one of their meals after the burrito chain reported sales at existing restaurants are down 22% from a year ago late Tuesday.
The restaurant chain has been hit by the effects of a nationwide E. coli outbreak earlier in the year.
The stock is down nearly 50% since highs in mid-2015 and pre-market Wednesday the shares were down a hefty 3.5% at $391.30.
But Twitter (NYSE:TWTR) stock may jump at the opening following rumours that influential micro-blogging site may have found a buyer in Walt Disney Co (NYSE:DIS). The finance blog Betaville reported the two companies agreed on a takeover price within the last few days. Disney shares were down 0.6% at $92.16 while Twitter was up 3.2% at $17.81.
The otherwise subdued bourse may also get a lift from aircraft maker Boeing (NYSE:BA) which raised revenue guidance for the full year while beating analyst estimates on profits partly due to a large one-off tax gain.
The company also reported an 8% drop in third quarter revenues, year-on-year, slightly above analyst expectations at $23.9bn, but down from $25.8bn the previous year. The company said this was due to the “timing of aircraft deliveries”.
Boeing shares were up 1.6% at $141.20.
But General Dynamics (NYSE:GD) shares sank 2.7% to $148.50 after reporting a slide in profits and larger-than-expected slide in sales.
Although better-than-expected third quarter profits were boosted by its IT business that provides the US government with cyber security, GD said sales declined more than analysts had forecast.
The Virginia-based company said profits slid to $683mln or $2.21 a share in the third quarter, compared with $733mln or $2.28 a share in the year-ago period.
Another downer was an airline.
Shares in the US’s largest domestic carrier Southwest Airlines’ (NYSE:LUV) nosedived 9.1% to $38.15 in pre-market trading as the group reported a bigger than expected drop in revenues and profits for the quarter.
For the three months to end of September, group revenue fell 3.4% to $5.1bn, compared with the $5.16bn analysts expected.
Higher labour costs and an aggressive airfare price war have kept Southwest Airlines’ earnings on the tarmac during the third quarter.
The Rio Olympics and the dramatic US election helped lift Comcast (NASDAQ:CMCSA), the largest US cable operator, to better-than-forecast revenues in the third quarter.
The owner of the NBC TV networks and Universal Pictures film studio added 32,000 video customers in the three months to end of September — marking its best third-quarter result in a decade. So far this quarter rival Verizon reported 36,000 new pay-TV customers, while AT&T lost 3,000.
Comcast shares were up 0.6% at $64.92 pre-market.
Finally, a bit of fizz as The Coca-Cola Co (NYSE:KO)reported earnings and revenue that came in higher than the estimates.
The company reported adjusted EPS of $0.49, beats by a penny and generated revenue of $10.6bn, $0.09bn higher than estimates. Full year comparable EPS forecast of 4–7% drop from $2.00 achieved in 2015 remain the same. No change in organic revenue outlook.
Shares were up 1.5% at $43.16.
More to come in this busy earnings week, with Tesla Motors (NASDAQ:TSLA), Buffalo Wild Wings (NASDAQ:BWLD) and Cheesecake Factory (NASDAQ:CAKE) set to release earnings after the close.
In data, New Home Sales for September (1000 EDT, 1400 GMT), as well as the EIA’s oil inventories (1030 EDT, 1430 GMT) are due for release on Wednesday.
Oil may not give much respite until the data. The US benchmark West Texas Intermediate was down 1.8% at $49.05.