The S&P 500 index closed just barely lower on Thursday, as industrial stocks fell and concerns over slowing global growth eclipsed gains in Facebook and Microsoft. The industrials sector closed 1.99 percent lower, due in no small part to 3M, United Parcel Service and Raytheon after they reported disappointing results. FedEx also fell in sympathy to UPS’s profit miss.
Amazon rose 1.7 percent after the market closed the result of a first-quarter earnings number that exceeded consensus estimates, although its second-quarter revenue forecast was below consensus.
Intel fell 7 percent after the chip maker forecast current-quarter revenue below consensus estimates. However, shares of Facebook and Microsoft were higher by 5.8 percent and 3.3 percent, respectively, after they reported better-than-expected results.
The S&P 500 index has rallied 17 percent so far this year, rebounding from a late-2018 slump, on hopes of a U.S.-China trade deal, the Federal Reserve’s move to pause interest rate hikes and some better-than-expected earnings reports.
The index ended the day 0.5 percent below its late September record high. It has struggled to break above that level as investors await more positive catalysts.
Refinitiv data through Thursday morning showed that Wall Street now expects S&P 500 first-quarter earnings to be level with the year-ago quarter, a sharp improvement from the 1.1 percent decline expected just on Wednesday, and better than the 2 percent fall expected at the start of April. Excluding energy, the growth rate would climb to 1.4 percent.
Gains in social media company Facebook lifted the communication services index one percent, making it the second biggest gainer among the 11 major S&P sectors. Healthcare stocks rose 1.1 percent.
Unfortunately, 3M fell almost 13 percent in its largest one-day percentage drop in more than three decades, after it reduced its 2019 earnings view and announced plans to lay off 2,000 workers. It was the largest decline since October 19, 1987, when it dropped 20.3 percent in a broad market crash.
Xilinx was the S&P’s largest percentage decliner, falling 17.1 percent after the chipmaker’s quarterly gross margins fell short of estimates. The Philadelphia chip index was down 1.8 percent.
Approximately 6.64 billion shares changed hands on the major domestic equity exchanges, in line with the 6.64 billion average for the last 20 sessions.
Day’s Economic News
New capital goods orders increased by the most in eight months during March, however a decline in shipments suggested business spending on equipment slowed during the first quarter.
Other data indicated that new claims for unemployment insurance recorded its largest increase in 19 months last week. The trend in jobless claims, however, remains consistent with a strong labor market.
According to this morning’s report by the Commerce Department, orders for non-defense capital goods, excluding aircraft and a closely watched proxy for business spending plans, rose 1.3 percent, due in large part to increasing demand for computers and electronic products.
It was the largest increase in these so-called core capital goods since last July and followed a 0.1 percent gain February. Core capital goods orders increased 2.8 percent on a year-on-year basis.
Shipments of core capital goods fell 0.2 percent in March, after gaining 0.2 percent in the prior month. Core capital goods shipments are used to calculate equipment spending in the government’s gross domestic product measurement.
Business spending on equipment is expected to have slowed in the first quarter because of the delayed impact of sharp drops in oil prices toward the end of 2018 and fading depreciation provisions in the 2018 tax bill.
March’s surge in core capital goods orders, however, suggests a pickup in business spending in the months ahead.
It also implies some stabilization in manufacturing activity, which has been squeezed by the ebbing stimulus from a $1.5 trillion tax cut package and supply chain disruptions caused by the trade war with China.
In March, orders for machinery rose 0.3 percent after declining 0.7 percent in February. Orders for computers and electronic products soared 2.2 percent. There were also increases in orders for electrical equipment, appliances and components. But orders for primary metals fell, as did those for fabricated metal products.
Overall orders for durable goods meant to last three years or more, were up 2.7 percent in March, after declining 1.1 percent in the prior month. Orders for transportation equipment rebounded 7.0 percent after falling 2.9 percent in February.
Orders for motor vehicles and parts rose 2.1 percent in March. Orders for non-defense aircraft jumped 31.2 percent after plunging 25.4 percent in February.
Boeing reported on its website that it received 44 aircraft orders, up from only five in February. There were no orders booked for its troubled 737 MAX aircraft.
Meanwhile, the Labor Department indicated that initial claims for state unemployment benefits rose by 37,000 claims to a seasonally adjusted 230,000 claims for the week ended April 20. The increase was the largest since early September 2017.
Claims fell to 193,000 claims in the week prior, which was the lowest level since September 1969.
Claims tend to be volatile around this time of the year because of the different timings of Easter and Passover holidays, as well as spring breaks for schools and universities.
Despite the volatility, labor market strength remains intact. The four-week moving average of initial claims, considered a better measure of labor market trends as it irons out week-to-week volatility, rose by 4,500 claims to a total of 206,000 claims last week.
Job gains averaged 180,000 new jobs in the first quarter, well above the roughly 100,000 jobs per month needed to keep up with growth in the working-age population. The unemployment rate is at 3.8 percent, close to the 3.7 percent Federal Reserve officials project it will be by the end of the year.