U.S. stocks closed mixed Wednesday, after seeing record highs in recent days, as markets weighed a report that an interim China-U.S. trade deal could be delayed until December and weakness in the energy sector underscored by disappointing corporate quarterly results.
How did major benchmarks perform?
The Dow Jones Industrial Average (DOW:DJIA) lost less than a point to end at 27,492.50, while the S&P 500 index (S&P:SPX) gained 2.16 points, or 0.07%, at 3,076.78. The Nasdaq Composite Index (AMERICAN:COMP) shed 24.05 points, 0.29%, closing at 8,410.63.
On Tuesday, the Dow (DOW:DJIA) rose 30.52 points, or 0.1%, at 27,492.63, surpassing its previous record, set on Monday. The Nasdaq (AMERICAN:COMP) edged 1.48 points higher to reach 8,434.68, a gain of less than 0.1%, also notching a second consecutive record close. The S&P 500 index (S&P:SPX) , meanwhile, edged 3.60 points lower, or 0.1% to end the day at 3,074.67.
The Dow’s year-to-date gain now stands at nearly 18% after rallying 3.3% in the past month. The S&P 500 is up more than 22% this year after surging 4% in the past month.
What’s drove the market?
Investors digested a report from Reuters that said a long-awaited interim trade deal between the U.S. and China could be delayed until December as discussions continue between the world’s two-largest trading partners about terms and a venue for a meeting.
From the U.S. side, there still was optimism that an agreement could be reached with China on the first segment of trade issues up for discussion.
“Negotiations are continuing and progress is being made on the text of the phase-one agreement. We will let you know when we have an announcement on a signing location,” said Judd Deere, White House spokesman.
Even so, stocks were struggling to find a catalyst to move beyond recent all-time highs.
“We’ve been rallying on the anticipation of a trade deal and the Reuters news report has caused a slight pullback,” said Peter Boockvar, chief investment officer at Bleakley Advisory Group, in an interview.
“The market may take a breather from here,” Boockvar told MarketWatch, noting that market sentiment has gotten extremely bullish on the back of last week’s Federal Reserve interest rate cut and on optimism about the prospects for a coming trade truce. “If we don’t get a deal, that’s a different story,” he said.
A preliminary, or “Phase One” trade deal between China and the U.S. is still a hope, but some strategists worry that the market may be placing too much emphasis on a deal coming to fruition soon.
“The market has taken an overly optimistic view on the Phase One deal, nudged on by better US economic data of late,” wrote Stephen Innes, market strategist at AxiTrader. “So, with delay comes chance that risk-on sentiment has too long to ferment, stalls and then maybe reverses as the waiting game weighs,” he said.
Also on the trade front, Reuters reported that China’s state-owned agriculture conglomerate COFCO struck a deal to buy $100 million of pork next year from European producer Danish Crown, a potential blow to American hog supplies that fueled a near 4% drop in December lean hog futures.
With the U.S. corporate earnings reporting season winding down, FactSet data indicates that 75% of S&P 500 companies to report thus far have topped analysts’ expectations.
Energy exploration and production companies have been a clear area of weakness again this reporting season, said Diane Jaffee, a senior portfolio manager at TCW.
“A host of E&P companies have reported over the past couple of days and it’s been widely discouraging,” she told MarketWatch.
Shares of Diamondback Energy (NAS:FANG) lost 14.44% Wednesday, its largest ever percentage fall according to Dow Jones Market data, after the shale operator reported a dip in profits due to lower oil and gas prices. Shares of Occidental Petroleum Corp. (NYS:OXY) shed 5.49%.
Shares of Chesapeake Energy Crop. (NYS:CHK) plunged 29.15% to 91 cents after reporting disappointing third-quarter results on Tuesday.
Chicago Fed President Charles Evan on Wednesday said the U.S. economy may not need additional interest rate cuts, noting that the economy appears “quite resilient,” in an interview with Yahoo Finance.
New York Federal Reserve Bank President John Williams was scheduled to speak at 6:30 p.m. ET at a global risk forum in New York.
Which stocks are in focus?
Shares of Xerox Holdings Corp . (NYS:XRX) closed higher after the Wall Street Journal said the company is considering a cash-and-stock offer for personal-computer and printer-maker HP Inc . (NYS:HPQ) , which has a market value of about $27 billion. HP gained 6.36%.
Shares of Humana (NYS:HUM) rallied 3.46% Wednesday, after the health care services company reported third-quarter profit and revenue that beat expectations, and provided an upbeat outlook. CVS Health (NYS:CVS) rose on stronger than expected earning also.
WW International Inc ., (NAS:WW) the company formerly known as Weight Watchers, raised its outlook for the year but the after-hours stock movement indicated that the hike left too much chance of a disappointment for Wall Street’s taste. The stock closed down 14.82%.
Wendy’s Co . (NAS:WEN) shares fell after the fast-food chain reported third-quarter results that beat expectations and raised its full-year guidance.
Shares of New York Times Co. (NYS:NYT) slipped 3.85% after the media company said it sees continued turbulence in digital ads as it reported its quarterly results.
Japanese technology company SoftBank Group Corp . (TKS:JP:9984) reported hefty losses as its earnings were hammered by office-space sharing startup WeWork. Japan-traded shares rose 0.65%.
Reporting after the bell, Qualcomm (NAS:QCOM) beat diminished earnings expectations, with the stock closing less than a point lower.
How are others assets trading?
December gold on Comex gained 0.6% after losing ground at a psychologically important level at $1,500 on Tuesday.
Oil slipped, with West Texas Intermediate crude for December delivery settling down fractionally at $56.35 a barrel, after settling 1.2% higher on Tuesday on the New York Mercantile Exchange. Supply rose sharply, a government agency said Wednesday.
The ICE U.S. dollar index (IFUS:DXY) , a gauge of the greenback’s performance against six major rivals, fell 0.06% to 97.93, after gaining 0.4% a day ago.
In Asia overnight, the China CSI 300 (CHINA:XX:000300) fell 0.45%, the Shanghai Composite (SHG:CN:SHCOMP) declined 0.4%. Hong Kong’s Hang Seng Index (HONG:HK:HSI) ended little-changed, while Japan’s NIKKEI 225 Index (NIKKEI:JP:NIK) edged up 0.2%. In Europe, the Stoxx Europe 600’s (STOXX:XX:SXXP) rose 0.2%.
<STRONG>Additional reporting by Rob Schroeder</STRONG>