US stocks slump on gloomy J&J results
US stocks weakened yesterday as disappointing sales from Johnson & Johnson stirred jitters about the strength of earnings, snapping the S&P 500’s six-day winning streak.
With the last two earnings periods characterised by cost cutting, investors have been hopeful that companies may start to show revenue growth in third-quarter results or improved outlooks.
Though investors remain optimistic about the earnings season, the hope for strong revenue could be premature. Indeed, Johnson & Johnson beat Wall Street’s earnings expectations, but repored revenue that was below forecasts, sending its shares down 2.4 per cent to $61.01.
But after-hours results from Intel could bode well for today’s session after the chip maker reported earnings and revenue that surpassed expectations.
“People are on the edge of their seats,” said Ronald Knipping, managing principal at the wealth management division of Rehmann.
“The leading indicator is going to be revenue growth, and right now there’s none.”
Financial shares were pressured, with several major banks reporting results this week. Goldman Sachs fell 1.5 per cent to $187.23 after after its stock was downgraded.
The Dow Jones industrial average declined 14.74 points, or 0.15 per cent, to end at 9,871.06. The Standard & Poor’s 500 Index slipped 3.00 points, or 0.28 per cent, to 1,073.19. But the Nasdaq Composite Index inched up just 0.75 of a point, or 0.04 per cent, to 2,139.89.30.
The Nasdaq stayed above water after Cisco Systems agreed to buy Starent Networks for $2.9bn, or $35 per share. Cisco’s stock added 0.5 per cent to $23.89, while Starent, which makes telecommunications equipment, surged 16.8 per cent to $33.91.
Intel also forecast revenue for the current quarter that was ahead of Wall Street’s targets on recovering demand for personal computers.
Stock index futures jumped following the results, while Intel shot up 5.2 per cent to $21.56 in extended trade.
Healthcare stocks slid during the session after a key Senate committee endorsed a healthcare overhaul