Stocks catch a cold as health care firms slide
US stocks fell after weak first-quarter reports from Johnson & Johnson and Goldman Sachs frustrated investors who hope that company earnings are on the rise.
Wall Street has high hopes for company earnings this spring, and weak results from the world's largest health care products company and one of the biggest financial firms had them concerned.
Johnson & Johnson took its biggest one-day loss in a year. Investors also looked for safety after the British government called for a surprise early election next month. Bond prices and the pound rose and European stock indexes tumbled.
Kate Warne, an investment strategist for Edward Jones, said Goldman Sachs and Johnson & Johnson had a dramatic effect on stocks because investors expect a very strong round of company earnings reports this month.
According to S&P Global Markets Intelligence, investors expect first-quarter earnings for S&P 500 companies to rise almost 10% compared to last year. That would be the biggest jump since 2014.
The Standard & Poor's 500 index shed 6.82 points, or 0.3%, to 2,342.19. The Dow Jones industrial average lost 113.64 points, or 0.6%, to 20,523.28. Goldman Sachs was responsible for most of that loss.
The Nasdaq composite fell 7.32 points, or 0.1%, to 5,849.47. The Russell 2000 index of small-company stocks recovered from an early loss and rose 0.71 points, close to 0.1%, to 1,361.89.
On Monday stocks made their biggest gain in six weeks. But over the last few weeks they've mostly drifted lower while bond yields have fallen to five-month lows.
Johnson & Johnson stumbled after investors were disappointed with its sales. Revenue from its biggest-selling drug, the Crohn's disease treatment Remicade, fell 6%. Meanwhile growth for many consumer health products slowed, and payers demanded bigger rebates on treatments for cardiovascular ailments, diabetes, and primary care products.
The maker of Tylenol and Band-Aids lost 3.90 dollars, or 3.1%, to 21.82 dollars.
Prescription drug distributor Cardinal Health also dropped after it gave weak profit forecasts for this year and next as drug prices continue to fall. It will also pay 6.1 billion dollars to buy a group of businesses from medical device maker Medtronic. Cardinal Health sank 9.44 dollars, or 11.5%, to 72.39 dollars. Competitors AmerisourceBergen and McKesson each fell about 5%.
Goldman Sachs' revenue fell short of investor projections in the first quarter as its highly-regarded trading desks did not perform as well as their competitors. The stock gave up 10.6 dollars, or 4.7%, to 215.59 dollars, its biggest loss since June. The stock reached all-time highs above 250 dollars a share in March.
British Prime Minister Theresa May reversed her position by calling for an early general election in June. She formally triggered Britain's exit from the European Union last month and she intends to seek a stronger parliamentary mandate. The pound climbed after May's announcement on the hope that the election will result in her getting a better deal for Britain in its talks with the EU. It rose to 1.2848 dollars from 1.2563 dollars.
Britain's FTSE 100 dropped 2.5% and France's CAC 40 lost 1.6%. In Germany the DAX shed 0.9%.
As investors snapped up government bonds, their prices jumped. The yield on the 10-year Treasury note fell to 2.18%, its lowest since November 11. It finished at 2.25% Monday.
Investors also bought shares of companies that pay big dividends. Household goods makers like Kraft Heinz and Molson Coors, along with utilities, real estate investment trusts and phone companies finished higher.
Streaming video company Netflix sagged after it did not gain as many subscribers in the first quarter as investors hoped. Its second-quarter profit guidance also fell short of analyst estimates. Netflix lost 3.89 dollars, or 2.6%, to 143.36 dollars.
US crude oil futures lost 24 cents to 52.41 dollars a barrel in New York. Brent crude, used to price international oils, lost 47 cents to 54.89 dollars per barrel in London.
The dollar slipped to 108.42 yen from 108.59 yen. The euro rose to 1.0730 dollars from 1.0642 dollars.
The benchmark Nikkei 225 index in Japan added 0.4% while South Korea's Kospi edged up 0.1% to 2,148.46. The Hang Seng of Hong Kong shed 1.4%.