Wall Street suffered its first loss in four sessions on Thursday after a mixed bag of quarterly reports and a warning by Verizon Communications that a strike by workers would likely impact its bottom line.
The benchmark S&P 500 index in recent days had rallied to within 1 per cent of its May record high, buoyed by a softer dollar and recovering crude prices. But investors had little patience for quarterly scorecards failing to meet already toned-down expectations.
“Earnings have been decent, outperforming, but outperforming expectations that have been dramatically lowered,” said Charlie Johnson, a sales trader at Greentree Brokerage Services in Philadelphia. “So it's like a shell game.”
Crude fell about 1 per cent, but hovered near five-month highs after the International Energy Agency said 2016 would see the biggest fall in non-OPEC production in 25 years. Oil and US stock prices have been moving in lockstep for several months.
Verizon's shares dropped 3.32 per cent after the telecom said a strike by its wireline workers would likely hurt earnings this quarter.
The Dow Jones industrial average declined 0.63 per cent to end at 17,982.52 points and the S&P 500 lost 0.52 per cent to 2,091.48. The Nasdaq Composite edged down 0.05 per cent to 4,945.89.
Nine of the 10 major S&P sectors fell, with the telecom sector down 2.74 per cent, thanks largely to Verizon.
After the bell, Google parent-company Alphabet, Microsoft, Visa and Starbucks all posted disappointing quarterly reports, sending their stocks down more than 4 per cent.
During the session, Travelers fell 6.05 per cent after the property and casualty insurer reported a 17 per cent fall in profit. The stock was the biggest drag on the Dow.
Of the S&P companies that have reported so far for the first quarter, 77 per cent have beaten profit estimates, compared with the 63 per cent that surprise in a typical quarter, according to Thomson Reuters I/B/E/S.
S&P 500 companies are expected to post a 7.2 per cent fall in profit on average, and then a less drastic 2.6 per cent dip in the second quarter.
“We think the market has already discounted the weak first quarter and possibly even some negative earnings in the second quarter,” said Paul Christopher, head global market strategist at Wells Fargo Investment Institute. “If the second quarter were as disappointing as the first quarter, you'd see another downturn.”
American Express shares climbed 0.91 per cent after revenue rose for the first time in five quarters, while Mattel sank 5.78 per cent after sales fell.
Under Armour rose 6.78 per cent, while General Motors added 1.46 per cent after both reported better-than-expected profits.
Declining issues outnumbered advancing ones on the NYSE by 1,897 to 1,095. On the Nasdaq, 1,493 issues fell and 1,311 rose.
The S&P 500 index showed 10 new 52-week highs and no new lows, while the Nasdaq recorded 47 new highs and 19 lows.
About 7.3 billion shares changed hands on US exchanges, above the 6.8 billion daily average for the past 20 trading days, according to Thomson Reuters data.