S&P 500 drifts near flat as earnings worries weigh

S&P 500 drifts near flat as earnings worries weigh

U.S. stock futures fell on Tuesday as investors worried over a hit to earnings from the prolonged U.S.-China trade war and receding hopes of a sharp rate cut by the Federal Reserve later this month.

Traders work on the floor at the NYSE in New York
Traders work on the floor at the New York Stock Exchange (NYSE) in New York, U.S., July 1, 2019. REUTERS/Brendan McDermid

NEW YORK: U.S. stocks were near flat on Tuesday as gains in internet shares were offset by fresh warnings from companies about the impact of the U.S.-China trade dispute on earnings.

In the latest indication of the trade war hurting businesses, German chemicals giant BASF forecast a 30per cent fall in its adjusted annual profit, and the S&P 500 chemical companies' index fell 1.2per cent.

Adding to the downbeat mood, RBC Capital Markets downgraded 3M Co to "sector perform," citing macro pressures from China, auto and electronics sectors. The industrial conglomerate's shares fell 2.4per cent and pulled the S&P industrial index down 0.5per cent.

The second-quarter earnings season is expected to kick off next week, with analysts forecasting profits at S&P 500 companies to have fallen 0.2per cent from a year earlier, according to Refinitiv IBES data.

Investors also braced for remarks this week from Federal Reserve Chairman Jerome Powell during his two-day testimony before Congress, which starts on Wednesday. Also due on Wednesday is the central bank's June policy meeting minutes.

Wall Street's main indexes have retreated from their record closing highs after a robust June jobs report on Friday tempered expectations of an aggressive 50-basis-point interest rate cut by the Fed.

"There may be some clarity coming out in the next couple of days based on what Powell says at these hearings," said Bucky Hellwig, senior vice president at BB&T Wealth Management in Birmingham, Alabama.

"The 10-year (Treasury) yield has just plummeted," he said. "With flatter earnings coming into the third quarter, we've seen the PE multiple expansion courtesy of these lower rates."

The Dow Jones Industrial Average fell 80.98 points, or 0.3per cent, to 26,725.16, the S&P 500 lost 2.77 points, or 0.09per cent, to 2,973.18 and the Nasdaq Composite added 27.72 points, or 0.34per cent, to 8,126.10.

On the trade war front, the United States and China are set to relaunch trade talks this week after a two-month hiatus. White House economic adviser Larry Kudlow said discussions with the European Union on a trade pact were also progressing.

Gains in Amazon.com , Facebook Inc and Netflix kept the Nasdaq in positive territory.

Netflix rose 0.9per cent after Cowen and Co said the video streaming services provider would benefit from high viewership for the recently released third series of its original show "Stranger Things".

Declining issues outnumbered advancing ones on the NYSE by a 1.26-to-1 ratio; on Nasdaq, a 1.11-to-1 ratio favored decliners.

The S&P 500 posted 20 new 52-week highs and no new lows; the Nasdaq Composite recorded 49 new highs and 43 new lows.

(Additional reporting by Medha Singh and Manas Mishra in Bengaluru; Editing by Sriraj Kalluvila and Jonathan Oatis)

Source: Reuters