By Alexandra Scaggs
Stocks edged lower Wednesday as investors digested mixed
earnings reports, with technology shares lagging after their recent
rebound.
The Dow Jones Industrial Average shed seven points, or less than
0.1%, to 16508. The S&P 500 index slipped three points, or
0.2%, to 1876 and the Nasdaq Composite Index dropped 31 points, or
0.7%, to 4130.
The tech-heavy Nasdaq Composite was on track to break its
six-session win streak, after a recent rebound in tech stocks had
helped pull other major indexes within 1% of their record closing
highs as of Tuesday's close. The S&P 500 also rose for six
consecutive sessions, to close Tuesday 0.6% below its latest April
2 record, and the Dow rose in five of those sessions, to close
Tuesday 0.4% shy of its all-time high from Dec. 31.
High-octane stocks in sectors such as biotechnology and social
media undid some of their latest rebound, after weeks of volatile
trading. The Nasdaq Biotechnology Index was down 1.6%. It gained
5.6% in the first two sessions of the week, after falling 11% in
March, and an additional 8.8% in the first two weeks of April.
"We're definitely seeing the rotation back out of growth," said
Ian Winer, director of trading at Wedbush Securities. This time, he
said, investors were unsettled by news from individual companies.
"If a name doesn't have a good earnings report, it is getting hit
pretty hard," said Mr. Winer.
Among individual stock moves, biotech firm Intuitive Surgical
dropped 11% after reporting disappointing first-quarter
results.
Streaming-video provider Netflix lost 5% after shareholders were
spooked by news that HBO agreed to license older episodes of its
shows to Amazon.com.
Also weighing on sentiment was a disappointing report on the
housing market. New-home sales for March declined 14.5% to a
seasonally adjusted annual rate of 384,000, while a rise of 2.3% to
a rate of 450,000 was expected.
Investors have been keeping a close eye on recent economic
reports, after a string of disappointing data at the beginning of
the year, amid an unusually icy winter. They are looking for growth
to rebound as the weather warms up.
"If it was all weather, it all should come back strongly," said
Jurrien Timmer, director of global macro strategy and portfolio
manager with Fidelity Investments. "If it only comes back halfway,
maybe it is something else...and earnings growth likely won't
accelerate."
In that case, he said, U.S. stock indexes would likely see
single-digit total returns over the full year.
Broadly, U.S. stocks have been bolstered in recent sessions by
corporate news and other economic data that indicated improvement.
The S&P 500 is up 0.6% so far this week. Companies in the index
are on track to report that first-quarter profits declined 0.6%
from last year, according to FactSet, but investors say they
attribute much of that weakness to the weather.
Earnings reports from Dow components were mixed on Wednesday.
Boeing rose 2% after beating first-quarter adjusted earnings and
revenue estimates and raising its full-year core earnings
outlook.
AT&T fell 3.7% after earnings fell from year-ago levels but
slightly topped estimates. The stock closed Tuesday at a 5
1/2-month high.
Procter & Gamble declined 0.3% after the consumer-products
giant beat fiscal-third-quarter earnings forecasts, but cut its
full-year outlook.
Several high-profile technology companies are due to report
results after the close. Among those companies, Apple slipped 1.1%
and Facebook lost 2.3%.
The yield on the 10-year Treasury note slipped to 2.685% from
2.726% late Tuesday.
Crude-oil futures slipped 0.3% to $101.48 a barrel. Gold futures
rose 0.3% to $1,285.00 a troy ounce. The dollar lost ground against
the euro and the yen.
European markets pulled back after data showing the economic
recovery in the euro zone is gathering momentum weakened hopes for
further easing measures from the European Central Bank. The Stoxx
Europe 600 fell 0.6%.
Asian markets were mixed. The Shanghai Composite fell 0.4% after
data showing China's manufacturing sector improved slightly in
March, but still pointed to a fourth straight month of contraction.
Japan's Nikkei Stock Average rallied 1.1%.
In other corporate news, Gilead Sciences, a biotechnology firm
that has been hit by volatile trading in recent weeks, climbed 1.8%
after reporting late Tuesday earnings and revenue that were well
above analyst estimates.
Plug Power slumped 4.8% after the fuel-cell technology company
said late Tuesday that it was planning a public share offering, its
third equity offering this year.
Illumina rose 3.3% after the biotechnology company reported late
Tuesday better-than-expected first-quarter earnings and provided a
second-quarter outlook that was above current projections.
Biogen Idec, another biotech firm that has rebounded in recent
sessions, slipped 0.5% after missing Wall Street projections for
adjusted first-quarter earnings per share, though it raised its
full-year outlook.
Write to Alexandra Scaggs at alexandra.scaggs@wsj.com