US stocks inched lower as Wall Street digests earnings, health care leads

U.S. stocks were mostly flat on Thursday as Wall Street kept an eye on mixed earnings and upbeat economic data following a week of record highs for the Dow and S&P.

The Dow Jones industrial average fell slightly as American Express weighed, and Caterpillar had the most positive impact. The S&P 500 was also down fractionally, with health care and telecom leading three sectors in the green. The Nasdaq composite fell roughly two points.

The number of Americans filing for unemployment benefits fell to a three-month low last week, in a sign that the labor market is stabilizing.

“This is the first indication that job growth in July was also pretty good,” said David Kelly, chief global strategist at J.P. Morgan Asset Management. “The economic narrative remains the same; the economy isn’t growing fast but it’s growing fast enough to cause the labor market to tighten.”

Initial claims for state unemployment benefits fell by 1,000 to a seasonally adjusted 253,000, the Labor Department said Thursday. Economists polled by Reuters expected claims to rise to 265,000.

Claims are near a 43-year low, hit in mid-April, Reuters reported.

“The better jobs number was a fundamental catalyst when you look at what happened in the market after,” said Liz Ann Sonders, chief investment strategist and senior vice president at Charles Schwab. Sonders highlighted the June nonfarm payroll number, which exceeded expectations with a headline figure of 287,000.

“This market rally had more to do with economic sentiment than anything,” she said.

Equity markets extended record highs this week. The Dow Jones industrial average extended gains Wednesday for nine consecutive days for the first time since 2013. The S&P 500 closed at a new record level and the Nasdaq composite had its highest close of the year.

Quarterly results came in mixed Thursday.

General Motors posted a record second-quarter profit Thursday, sending shares up more than 3 percent. The stock is pacing for its twelfth consecutive positive day for the first time ever.

Biogen helped boost the Nasdaq and S&P, with the stock up more than 6 percent after posting positive results.

Intel shares fell more than 3.5 percent after it beat analysts’ expectations for earnings on Wednesday, but posted revenues came in lower than expected. Fellow chipmaker Qualcomm beat Wall Street expectations and issued strong forward guidance, sending shares up nearly 7 percent.

Bank results continued to surprise this week, with Morgan Stanley reporting earnings of 75 cents per share versus consensus expectations of 59 cents, according to Thomson Reuters. Morgan Stanley joined Goldman Sachs, Citigroup, JPMorgan Chase, and Bank of America on the list of U.S. financial institutions topping second-quarter profit forecasts.

“These numbers are confirming the earning bounce back we were expecting, given flat oil prices and a flat U.S. dollar,” J.P. Morgan’s Kelly said. “What we’re getting is confirmation that the economy is still growing steadily and earnings are rebounding.”

Of the 70 S&P 500 companies reporting as of Wednesday, 67 percent beat estimates according to Thomson Reuters. Starbucks, AT&T, Capital One, Visa, Schlumberger, Boston Beer and Chipotle report after the bell.

European stocks moved lower after the European Central Bank left key interest rates unchanged. The non-move was widely expected but further policy stimulus from global central banks is thought to be coming in the months following June’s Brexit vote.

ECB President Mario Draghi said at a press conference that the central bank was ready to act if necessary but officials wanted to “reassess the underlying macroeconomic conditions” and data before making a decision.

The pan-European STOXX 600 was up slightly after falling in early trade. European travel stocks went lower, led by Lufthansa, which cut its full-year profit target as bookings declined due to terrorist attacks and economic uncertainty, the company said. Shares of the airline fell 8 percent after the news.

The German DAX traded roughly 25 points higher, the U.K.’s FTSE 100 rose half a percent, and France’s CAC was up 0.03 percent.

Then yen hit new lows after news that Tokyo was considering a 20 trillion package of stimulus to bolster the economy. The currency later recovered 1 percent as Bank of Japan Governor Haruhiko Kuroda told the BBC radio that there is no need for “helicopter money” to fight inflation, and the central bank already had mechanisms in place to ease further if needed.

Although the interview was published Thursday, the BBC said the it was recorded in June. The yen gained 1 percent against the dollar after Kuroda’s comments, trading near 106.25 yen.

The dollar was weaker against a basket of currencies after hitting four-month highs Wednesday.

The Euro hit a high of $1.1058 against the dollar before losing most of the gains in choppy trade. The euro traded near $1.10, while the British pound fell to $1.32.

“The market can handle a little strength in the dollar but not if it starts to impact other areas that cause financial conditions to tighten,” said Sonders of Charlies Schwab. “We’ve been in this policy loop, at the heart of it is what the dollar is doing.”

Oil was slightly lower, with WTI trading near $45 after hitting a two-month intraday low a day earlier. Brent crude futures were just below $47.

Yields on U.S. sovereign bonds were flat after moving higher Wednesday with increased expectations of a rate hike. The U.S. 2-year note fell to yield 0.70 percent. The 10-year yield fell to yield 1.58 percent, while the U.S. 30-year note yielded 2.32 percent.

Gold was up slightly after hitting its lowest intraday level since June 28 a day earlier. The precious metal rose by $4, trading at $1,323 per ounce.

The Dow Jones Industrial Average traded roughly 50 points lower with Intel as the biggest laggard, and Caterpillar leading the gainers.

The Dow Transports fell almost 1.5 percent at the open, pacing for the worst day since June 27. Southwest Airlines led the sector lower after reporting record quarterly profit but a miss for Wall Street estimates. Shares of the company fell nearly 10 percent in early trading.

The S&P 500 fell 4 points, with technology, energy, and health care leading the upward trending sectors. Industrials and utilities led the S&P sectors lower.

The Nasdaq fell about 5 points to roughly 5,094 after having its highest close of the year a day earlier.

The CBOE Volatility Index (VIX), widely considered the best gauge of fear in the market, traded near 11.84.

Advancers led decliners on the New York Stock Exchange, with an exchange volume of 286.14 million, and a composite volume of 1.31 billion.

Source: CNBC