S&P 500 Rises on Merck Results, Dollar Drops Before Fed DecisionStephen Kirkland and Jeremy Herron
The Standard & Poor’s 500 Index rose as Merck & Co. led gains among health-care shares, while the dollar weakened to a two-month low with the Federal Reserve holding a two-day policy meeting. Treasuries dropped.
The S&P 500 was up 0.3 percent by 4 p.m. in New York, ending 0.1 percent below an all-time high. The Nasdaq 100 Index slipped 0.2 percent as Apple Inc. fell 1.6 percent. Twitter Inc. tumbled 18 percent after results released unexpectedly indicated a lower sales forecast. The Bloomberg Dollar Spot Index slid 0.6 percent to the lowest level since February. Yields on 10-year Treasuries climbed eight basis points to 2 percent.
The Fed’s long-awaited increase to its benchmark interest rate won’t happen until at least September, according to economists surveyed by Bloomberg News, with officials trying to stoke inflation and hiring after the economy stumbled last quarter. Consumer confidence unexpectedly dropped in April to a four-month low. Merck jumped after boosting its forecast while Apple declined on concern that iPhone sales growth may slow.
“Earnings is driving most everything that’s going on right now,” said Tom Wirth, senior investment officer for Chemung Canal Trust Co., which manages $1.9 billion in Elmira, New York. “When I look at the stocks that are doing well and those that aren’t doing so well, it’s mostly earnings driven here.”
Mixed data on the U.S. economy have fueled speculation that the Fed won’t raise rates at this week’s policy meeting. The weaker-than-forecast report on consumer confidence came before a report Wednesday projected to indicate economic growth slowed in the first quarter.
A report Tuesday indicated home prices in 20 U.S. cities climbed at a faster pace than forecast in the year ended February.
“The bad news is keeping the Fed on hold, which investors consider a good thing, and I think most investors look for improvement later in the year.” said Bruce McCain, who helps oversee more than $25 billion as chief investment strategist at the private-banking unit of KeyCorp in Cleveland, in a telephone interview.
Merck surged 5 percent, the most since January 2014, after boosting its annual profit projection. Pfizer Inc. was little changed after cutting its 2015 sales forecast. United Parcel Service Inc. rose 3.4 percent on a better-than-estimated profit report, with gains fueled by an increase in international deliveries and declining fuel costs.
Twitter plunged the most since February last year after revenue fell short of estimates in the first quarter, even after the company introduced new products and tweaked features to attract more people. Twitter was was slated to report earnings after markets closed, though Selerity Inc., a financial news service, disclosed the results shortly after 3 p.m. in New York.
Twitter shares initially lost 5.8 percent on the Selerity report before trading was halted. The stock re-opened lower by 20 percent. The Nasdaq Internet Index lost 1.4 percent, while the Dow Jones Internet Composite Index fell 1.2 percent.
The Nasdaq Biotechnology Index slid 1.2 percent after plunging 4.1 percent Monday. Disappointing results sent Whirlpool Corp. down 7.1 percent.
Of the S&P 500 index members that have already reported this season, about three quarters beat profit projections and about half topped sales estimates, according to data compiled by Bloomberg.
The value of global equities rose to a record $72.2 trillion Monday with U.S. earnings beating analysts’ estimates and central banks from Japan to Europe boosting stimulus to shore up their economies.
The Stoxx Europe 600 Index ended down 1.5 percent after nearing a record on Monday. Novartis AG, Roche Holding AG and Sanofi lost at least 0.9 percent as European drugmakers slid. Commerzbank AG dropped 5.7 percent after Germany’s second-biggest bank said it will sell as much as 1.4 billion euros ($1.5 billion) of shares.
“European equities might have moved ahead too far too fast,” said Ion-Marc Valahu, co-founder and fund manager at Clairinvest in Geneva. “Growth in Europe is not there yet, even in Germany. In addition, we have the Fed on Wednesday so a bit of caution is warranted.”
Treasuries fell for a second day as investors were lured away by higher-yielding corporate debt and the Fed started its meeting.
Companies have rushed to borrow while interest rates remain low in the U.S. A mixed bag of economic data has had economists pushing out bets for an increase, with most thinking the first rate hike won’t happen until September, according to the latest Bloomberg survey. In a survey last month, a majority predicted an increase in June or July.
The Shanghai Composite Index, the world’s best performing major equity gauge this year, slid 1.1 percent from a seven-year high Tuesday.
“The market will become more volatile as the index gets higher,” said Jimmy Zuo, a Shenzhen-based trader at Guosen Securities Co. “There’s a strong belief that disappointing data and earnings will persuade the government to do more to safeguard the economy.”
The People’s Bank of China is considering an expansion of its Pledged Supplementary Lending program to encourage banks to buy local government bonds, improve dilapidated housing and fund the government’s “One Belt, One Road” project, said people familiar with the matter, who asked not to be identified because the deliberations are private.
Rubber was on the cusp of a bull market Tuesday as inventories shrank in China, the biggest consumer, while top exporters curb shipments to bolster prices. Contracts advanced 0.6 percent to 14,280 yuan a metric ton on the Shanghai Futures Exchange.
Nickel fell 0.8 percent following three days of gains after a union at BHP Billiton Ltd.’s Cerro Matoso mine, the world’s second-largest ferro-nickel site, said it was closer to a deal to end a strike. The Bloomberg Commodity Index rose 0.3 percent Tuesday in a second day of gains.