The close: Stocks slip on worries about earnings, U.S. stimulus outlook

Stocks on Wall Street closed little changed on Tuesday, with the Dow and S&P 500 dipping on disappointing earnings and little hope for a U.S. coronavirus stimulus before Election Day, though the Nasdaq rose ahead of big technology company results. The TSX also closed lower, even with a modest rebound in the price of crude oil.

Investor sentiment sagged after the White House said a deal on COVID-19 relief could come in “weeks,” meaning a deal is unlikely before the Nov. 3 election.

But the tech-heavy Nasdaq rose as Microsoft Corp firmed in the run-up to its results after the closing bell, and the technology heavyweights kept the S&P 500 slightly in the black for much of the session.

Microsoft beat Wall Street estimates for quarterly revenue which rose 12% to $37.2 billion, as the software giant benefited more from a global shift to work and learning from home.

The S&P/TSX Composite Index closed down 58.61 points, or 0.36%, at 16,020.94. Most sectors were lower for the day, including energy, which lost 0.12% despite crude oil settling higher as companies shut down some U.S. Gulf of Mexico oil production ahead of an approaching storm. Brent crude closed up 75 cents, or 1.9%, at $41.21 per barrel by 1:22 ET. U.S. oil gained $1.01 cents, or 2.6%, to $39.57. Both contracts fell more than 3% on Monday. Surging coronavirus infections and rising Libyan supply limited gains on Tuesday.

The materials sector on the TSX rose almost 1%, as U.S. gold futures settled up 0.3% to $1,911.90, helped by a weaker U.S. dollar.

Husky Energy rose a further 7.32%, adding to a sharp rally Monday after weekend news that Cenovus Energy plans to take over the company. Cenovus rose 6.71% on Tuesday, recovering some of its Monday losses.

In the U.S., shares of drugmaker Eli Lilly and Co fell 6.9% after quarterly profits took a hit from increased costs to develop a COVID-19 treatment. A trial of its antibody therapy failed to show a benefit in hospitalized patients.

“This pullback that we’ve seen is a little bit more of a risk-off move as an additional stimulus package now has been pushed aside,” Kevin Flanagan, head of fixed income strategy at WisdomTree Investments, said. “That led to some disappointment.”

On Monday, the three major U.S. stock indexes posted their biggest declines in about four weeks on a record number of new coronavirus cases in the United States and some European countries, and as the elusive stimulus rattled investors.

Sectors sensitive to economic growth took a hit. The S&P 500 banks index fell 2.73% and the S&P energy sector slid 1.38%.

Meanwhile, Wall Street’s fear gauge rose to its highest level since early September on election jitters.

Democratic challenger Joe Biden leads President Donald Trump in nationwide polls but the race is much tighter in battleground states which should determine the outcome.

The Dow Jones Industrial Average fell 222.19 points, or 0.8%, to 27,463.19 and the S&P 500 lost 10.29 points, or 0.30%, to 3,390.68. The Nasdaq Composite added 72.41 points, or 0.64%, to 11,431.35.

The Nasdaq advanced in anticipation of results later this week from Apple Inc, Amazon.com, Google-parent Alphabet and Facebook Inc. The tech bellwethers together account for more than one-fifth of the S&P 500′s total value.

The NYSE FANG+TM Index rose about 2.15%.

Analysts expect the tech sector to post a 0.4% increase in third-quarter earnings from a year earlier, while overall S&P 500 profit is forecast to fall 16.2%, according to Refinitiv data.

Concerns over a rise in U.S. coronavirus cases are weighing on the market but the technology sector seems to be the least exposed, said Rick Meckler, a partner at Cherry Lane Investments in New Vernon, New Jersey.

“A focus on big technology companies may move this market to rally despite the problems the virus is creating,” he said.

Semiconductor designer Advanced Micro Devices Inc fell 4.1% after it agreed to buy Xilinx Inc in a $35 billion all-stock deal. Xilinx shares soared 8.6%, the largest percentage gainer on the S&P 500, while those of AMD-rival Intel fell 2.3%.

Shares of Franklin Resources Inc fell 13.6%, the largest decliner on the S&P 500, as the money manager reported quarterly adjusted earnings of 56 cents per share, below analysts' expectations.

Reuters, Globe staff

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