The major equity indexes closed out the trading day on Wednesday just over the line into negative territory as a decline in healthcare shares overshadowed a string of positive earnings reports and upbeat economic data from both the U.S. and China.

The healthcare sector saw its largest percentage decline in four months, falling 2.9 percent on regulatory worries.

UnitedHealth, Pfizer, Merck and Abbott Laboratories all closed down between 1.9 percent and 4.7 percent and were among the largest drags on the broader S&P 500.

Morgan Stanley rose 2.6 percent after exceeding consensus estimates due to cost-cutting and growth in its wealth management segment.

United Continental rose 4.7 percent following Tuesday’s after-market earnings report, where the airline bested consensus estimates and held its 2019 profit target firm, even as Boeing’s 737 MAX jets remain grounded.

Textron benefited from increased business jet demand, sending its earnings higher, and it share price up 4.0 percent.

PepsiCo reported better-than-expected first-quarter sales on strong North American demand. The packaged food company’s shares rose 3.8 percent.

With reporting season in high gear, analysts now expect Jan-March S&P 500 profits to have dropped 1.8 percent year-on-year, according to Refinitiv data, which would mark the first earnings decline since 2016.

Of the 54 S&P 500 companies that have posted thus far, 79.6 percent have exceeded consensus, compared to the 65 percent average going back to 1994.

Of the 11 major sectors in the S&P 500, six ended the session in the black.

Qualcomm rose 12.2 percent after the company settled its long-running legal battle with Apple. Apple rose 1.9 percent. And the news sent other chipmakers higher, with the Philadelphia SE Semiconductor index advancing 1.6 percent.

On the economic front, our trade deficit fell to an eight-month low in February due to a 20.2 percent drop in imports from China. China, meanwhile, saw its first-quarter GDP number grow at a better-than-expected 6.4 percent annual rate.

Approximately 7.07 billion shares changed hands on the major domestic equity exchanges, as compared to the 6.84 billion share average over the past 20 trading days.

Beige Book

Labor markets remained tight across the United States as businesses struggled to find skilled workers and wages grew modestly, the Federal Reserve said on Wednesday in its latest report on the economy.

The Fed’s “Beige Book” report, a glimpse of the economy based on conversations with business contacts across all 12 of the Fed’s districts, found economic activity grew at a slight-to-moderate pace in March and early April. A few districts reported some strengthening in economic growth.

Prices have risen modestly since the last Beige Book, with tariffs, freight costs and rising wages often cited as key factors, the Fed said. It added that consumer spending was mixed but suggested sluggish sales for both general retailers and auto dealers.

Wages grew moderately in most districts for both skilled and unskilled workers, with only three reporting slight growth in workers’ pay, the Fed said.

Businesses in most districts reported shortages of skilled workers, mainly in manufacturing and construction, but also in technical and professional roles. Companies have responded to the tight labor market by boosting bonuses and benefits packages, along with raising wages moderately, according to the report.

Employment increases were most highly concentrated in highly-skilled jobs.

In terms of the manufacturing sector, the Fed said contacts in many districts reported that trade-related uncertainty was weighing on activity.

Several Fed districts said flooding and severe weather in the Midwest was affecting agricultural production. The Kansas City Fed reported that recent blizzards and flooding could weigh on the farming sector in the coming months, as it had resulted in damaged infrastructure and losses of cattle and crops.

The Richmond Fed reported a few federal contractors saw business starting to return to normal after the government shutdown and the San Francisco Fed saw higher-than-expected retail sales once the government reopened.

The Fed held interest rates steady at its last policy meeting in March, sticking with the “patient” approach adopted by policymakers in January, given little sign of rising inflation and the growing concerns about trade tensions and slowing global growth.

The Beige Book gives the Fed a sense of what central bank officials are hearing in their own districts, which in turn could inform their thinking when it comes to the economy and the Fed’s stance on rates.

The latest Beige Book was prepared by the St. Louis Fed based on information collected on or before April 8, 2019.

Trade Deficit at 8-Month Low

Our trade deficit fell 3.4 percent to $49.4 billion in February, the lowest level since June 2018, as imports from China fell sharply. 

The surprise second straight monthly narrowing in the trade gap reported by the Commerce Department on Wednesday was also driven by soaring aircraft exports, which are likely to reverse after Boeing halted deliveries of its troubled 737 MAX aircraft. Therefore, it is likely that the trade deficit will rise again due to our insatiable appetite for cheaper imports.

Talks between Washington and China to resolve the bitter trade war have been dragging. We are also embroiled in conflicts with other trading partners, including the European Union, contributing to big swings in exports and imports data in recent months.

The politically sensitive goods trade deficit with China fell 28.2 percent to $24.8 billion in February as imports from China fell 20.2 percent. Our exports to China rose18.2 percent in February.

Washington imposed tariffs on $250 billion worth of goods imported from China, last year, with Beijing retaliating with duties on $110 billion worth of American products.

February’s smaller trade deficit suggests the economy will probably avoid a sharp slowdown in growth that had been feared at the start of the year. The goods trade deficit declined 1.7 percent to an eight-month low of $72.0 billion in February.

When adjusted for inflation, the overall goods trade deficit fell $1.8 billion to $81.8 billion, also the lowest since last June. Goldman Sachs raised its first quarter gross domestic product estimate by four-tenths of a percentage point to a 2.1 percent annualized rate.

The Atlanta Federal Reserve bumped up its GDP forecast to a 2.4 percent pace from a 2.3 percent rate. The economy grew at a 2.2 percent rate in the fourth quarter.

In February, goods exports increased 1.5 percent to $139.5 billion. The surge in goods exports is unlikely to be sustained given slowing global economic growth. 

Shipments of civilian aircraft rose $2.2 billion in February. Exports of motor vehicles and parts increased by $0.6 billion. There was a small rise in soybean exports. Soybean exports remained moderate because of an outbreak of swine flu that has reduced demand for soybean meal in China.

In February, imports rose 0.2 percent to $259.1 billion. Consumer goods imports increased by $1.6 billion in February, led by a $2.1 billion rise in imports of cellphones and other household goods.

Imports of industrial supplies and materials fell by $1.2 billion. Capital goods imports rose slightly, pointing to slower business spending on equipment.

Crude oil imports fell to 173.7 million barrels, the lowest since March 1992, from 223.1 million barrels in January. An increase in domestic production has seen the United States become less dependent on foreign oil.