The major domestic equity indexes moved lower on Wednesday as developers of videogames posted disappointing revenue forecasts. In addition, the Street remains anxious about what will the developments regarding U.S.-China trade relations will look like after talks are concluded.
The S&P 500 and the Nasdaq indexes were weighed down by declines in the shares of Electronic Arts, which fell 13.3 percent after the company projected full-year revenue coming in below Wall Street estimates. The sharp decline pulled down shares of rival Activision Blizzard, which fell 10.1 percent.
Shares of industry peer Take-Two Interactive Software also dropped 13.8 percent, after the company’s offered up a similar forecast that was also underwhelming. The slump in videogame stocks contributed to a 1.5 percent decline in the S&P 500 communication services sector, the largest decline among the S&P’s major sectors.
Despite the fall, Wall Street’s indexes remained near two-month highs. A 7.3 percent gain in the S&P 500 would put the index above its record closing September high. However, there remains a void of catalysts for market gains.
Treasury Secretary Mnuchin said trade talks with China last week were “very productive” and confirmed that he and other officials will travel to Beijing for the next round of meetings.
Although the major equity indexes were not exciting, the Philadelphia SE Semiconductor Index advanced 2.6 percent. Shares of Apple supplier Skyworks Solutions rose 11.5 percent after the company announced $2 billion in stock buybacks. The shares of Microchip Technology rose 7.3 percent after the company suggested the chipmaker industry was close to recovery from its recent downturn.
Shares of Capri Holdings, formerly Michael Kors, rose 11.3 percent after the fashion company posted a better-than-expected quarterly earnings number and raised its revenue forecast.
Anadarko Petroleum fell 7.4 percent after the oil and gas producer’s fourth-quarter earnings number missed consensus estimates.
Approximately 6.70 billion shares changed hands on the major domestic equity exchanges, as compared to the 7.50 billion share average over the past 20 trading days.
Trade Deficit Falls
Our trade deficit fell for the first time in six months during November as cheaper oil and higher domestic petroleum production helped to curb the country’s import bill, leading a consensus for increased economic growth in the fourth quarter. The trade deficit fell 11.5 percent to $49.3 billion in November. It had increased for five straight months.
The politically sensitive goods trade deficit with China fell to $37.9 billion in November from $43.1 billion in October.
A report by the Commerce Department on Wednesday indicated a decline in imports of consumer goods such as cellphones and other household goods. The decrease in imports followed five straight monthly increases, as businesses stocked up amid an escalating trade war between the United States and China.
When adjusted for inflation, the goods trade deficit decreased $7.5 billion to $80.8 billion in November.
The decline in the so-called real trade deficit led some to raise their fourth-quarter GDP growth forecasts by as much as six-tenths of a percentage point to as high as a 3.0 percent annualized rate.
Trade subtracted 1.99 percentage points from GDP growth in the July-September quarter. The economy grew at a 3.4 percent pace in the third quarter.
In November, imports of goods and services fell 2.9 percent to $259.2 billion. Imports of petroleum products fell $1.4 billion, with crude oil imports dropping $0.7 billion. Cheaper oil prices weighed on the petroleum import bill.
The price of crude oil averaged $57.54 per barrel in November, the lowest since April. A domestic energy boom has enabled the United States to reduce its dependence on foreign oil, leading to a reduction in the volume of crude imports.
Consumer goods imports decreased $4.3 billion, pulled down by a $2.3 billion drop in imports of cellphones and other household goods.
Exports of goods and services fell 0.6 percent to $209.9 billion. Exports of consumer goods decreased $0.9 billion and those of petroleum products fell $0.6 billion. There were also declines in exports of soybeans, which have been targeted by China in the trade dispute.
Exports of capital goods, however, increased $1.4 billion, helped out by a $1.0 billion rise in civilian aircraft shipments.