U.S. equities closed mostly lower on Wednesday, with IBM and oil prices pushing down the Dow Jones industrial average.
The Dow closed about 120 points lower with IBM accounting for 57 of those points, while Goldman Sachs added 10 points to the downside. IBM posted mixed quarterly results as earnings beat but sales fell for the 20th straight quarter on a year-over-year basis. The stock fell about five percent.
“The market hasn’t given up any substantial ground but the leadership- these large-cap names- are being challenged,” said Daniel Deming, managing director at KKM Financial. “I think that’s putting into question some of the valuations in this earnings season.”
The blue-chips index also notched a two-day drop of more than 200 points and has closed lower in five of the past six sessions.
The S&P 500 fell about 0.2 percent, with energy stocks leading decliners. The energy sector fell 1.4 percent as U.S. oil settled 3.76 percent lower at $50.44 per barrel.
“That enthusiasm we had earlier in the day faded with the European close and WTI” closed below $52, weighing on equities, said Art Hogan, chief market strategist at Wunderlich Securities.
Financials traded higher earlier in the session after Morgan Stanley posted a strong first-quarter as its fixed-income trading revenue doubled year over year.
The investment bank’s results easily topped Wall Street expectations, in stark contrast to Dow component Goldman Sachs, which shocked investors with disappointing earnings and revenue.
The Nasdaq composite outperformed, advancing 0.2 percent.
Nick Raich, CEO of The Earnings Scout, said that 77 percent of the S&P 500 companies that had already reported topped Wall Street estimates and 558 percent outperformed sales expectations.
“The first-quarter numbers themselves have been great thus far, … which was widely anticipated,” he said. “What these earnings are doing is confirming the rally in late 2016, but they are not telling you what will happen later on.” Raich added that two-thirds of the companies that had reported also saw their second-quarter earnings estimate get cut.
American Express, eBay, Qualcomm and CSX are among the companies scheduled to report after the bell Wednesday.
Investors also kept an eye on France, as the country’s presidential election drew closer. Four candidates are within striking distance of the presidency, including far-leftist Jean-Luc Melenchon and conservative Marine Le Pen.
“Everyone is holding their breath ahead of the first round,” said Luke Bartholomew, investment manager at Aberdeen Asset Management. French presidential elections are held over two rounds; the first one is scheduled for Sunday.
“There is still the possibility of a runoff between [communist] Jean-Luc Melenchon and [far-right candidate] Marine Le Pen,” Bartholomew said. “If that doesn’t happen, then investors will breath a sigh of relief.”
But centrist “Emmanuel Macron should secure passage into the runoff to make the news from across the Atlantic on Sunday somewhat uneventful. The focus among traders will therefore quickly turn to the impending avalanche of earnings,” said Jeremy Klein, chief market strategist at FBN Securities.
France’s CAC 40 index posted its worst one-day performance since Sept. 26 on Tuesday as jitters over the election led investors to sell ahead of the contest.
In economic news, the Federal Reserve’s Beige Book showed economic activity increased across all 12 districts. Market expectations for a rate hike in June have slipped recently, amid disappointing inflation and retail sales data.
“But at this juncture, we’re still maintaining that two more rate hikes are likely this year,” said Paul Springmeyer, investment managing director at U.S. Bank’s Private Client Reserve.
The Dow Jones industrial average fell 118.79 points, or 0.58 percent, to close at 20,404.49, with IBM leading decliners and Merck the top advancer.
The S&P 500 fell 4.02 points, or 0.17 percent, to end at 2,338.17, with energy leading seven sectors lower and health care outperforming.
The Nasdaq gained 13.56 points, or 0.23 percent, to close at 5,863.03.
Decliners were a step ahead of advancers at the New York Stock Exchange, with an exchange volume of 821.24 million and a composite volume of 3.501 billion at the close.
The CBOE Volatility Index (VIX), widely considered the best gauge of fear in the market, traded near 14.98.
Earnings: American Express, eBay CSX, Canadian Pacific Railway, Qualcomm, Abbott Labs, SLM
2:00 p.m. Beige book
Earnings: Travelers, Verizon, Blackstone, Philip Morris, ABB, Bank of NY Mellon, Alliance Data, PPG Industries, Imax, MGIC Investment, KeyCorp, Nucor, Janus, Visa, Sonoco Products, Sherwin-Williams, Mattel, NCR, Danaher
8:30 a.m. Weekly claims
8:30 a.m. Philadelphia Fed
Earnings: General Electric, Honeywell, NextEra Energy, Kansas City Southern, Schlumberger, Rockwell Collins, Stanley Black and Decker, SunTrust, Morningstar, Steve Madden
9:45 a.m. Manufacturing PMI
10:00 a.m. Existing home sales
Watch: Market still on its heels