Major U.S. stock indexes opened lower Tuesday as a pause in Johnson & Johnson’s COVID-19 vaccine trials weighed on sentiment. The Canadian market also opened a little in the red, despite being closed Monday for a holiday when U.S. markets posted solid gains.
The Dow Jones Industrial Average fell 72.57 points, or 0.25%, at the open to 28,764.95. The S&P 500 opened lower by 0.21 points, or 0.01%, at 3,534.01. The Nasdaq initially opened higher but soon slipped into the red as well.
The S&P/TSX composite index was down 64.34 points, or about half a percentage point, at 16,498.47, as a decline in the materials sector - spurred by a lower gold price - kept investors on the defensive.
Citibank, JPMorgan Chase and BlackRock all reported third-quarter results that beat Street expectations this morning, although share reaction in the financial sector has only been mildly positive, suggesting investors were already positioned for relatively favourable results.
U.S. bank stocks have widely underperformed the broader market in 2020 and analysts expect the sector’s earnings to take years to make a full recovery as interest rates remain near record lows. Overall, analysts expect third-quarter earnings for S&P 500 firms to slide 20.7 per cent from a year earlier, smaller than a 31 per cent tumble in the prior quarter.
On Monday, U.S. stocks rose sharply, with tech shares outperforming, while investors monitored stimulus negotiations in Washington. The S&P 500 rose 1.6% and the Nasdaq advanced 2.6%. Tech strength was particularly focused on Apple, which soared 6.4% and enjoyed its biggest advance since July 31 as investors positioned ahead of the unveiling of its first 5G iPhone.
On Tuesday, concerns over COVID-19 and its economic impact was denting sentiment, after Johnson & Johnson said it was pausing its vaccine candidate due to an unexplained illness in a study participant, delaying one of the highest profile efforts to contain the global pandemic.
The participant’s illness is being reviewed and evaluated by an independent data and safety monitoring board as well as the company’s clinical and safety physicians, the company said in a statement.
J&J, which also reported third-quarter results that beat Street expectations, said that such pauses are normal in big trials, which can include tens of thousands of people. It said the “study pause” in giving doses of the vaccine candidate was different from a “regulatory hold” required by health authorities. The current case is a pause.
The TSX Tuesday should get an assist from higher oil prices, with are up nearly 2 per cent this morning and buoyed by positive trade data out of China. China’s crude oil imports rose 2.1 per cent in September from a month ago as some delayed cargoes finally cleared customs, Reuters reported.
European shares hovered at five-week highs on Tuesday following a three-day rally that was sparked by hopes of more U.S. stimulus, while Airbus slipped after JPMorgan downgraded its rating on the stock.
Currencies and bonds
The Canadian dollar is little changed against the U.S. dollar so far this morning, although outperforming largely softer G10 currencies. “Solid jobs data last week helped lift sentiment surrounding the CAD to some extent to help extend the CAD’s relatively strong run so far in October. This reflects the positive risk undertone that has helped drive stocks higher as well as relatively well-supported crude oil prices,” Scotiabank analysts commented in a note.
The greenback is modestly firmer in light trading ahead of this morning’s U.S. CPI data.
Other corporate news
Air Canada has slashed its price to buy Canadian tour operator Transat A.T. Inc, with the deal now worth about C$188.7 million, down from C$720 million, as COVID-19 weighs on travel demand, the companies said in a statement on Saturday.
JPMorgan Chase saw its profits improve marginally in the third quarter, a notable change after the nation’s largest bank had to set aside billions in the last two quarters to cover losses from the coronavirus pandemic. The New York-based bank said Tuesday that it earned a profit of $9.44 billion, or $2.92 a share, in the July to September period. That’s up from a profit of $9.08 billion, or $2.68 per share, in the same period a year earlier. The results beat analysts' expectations for earnings of $2.23 a share, according to FactSet. The bank decided not to set aside any significant funds to cover potentially bad loans, surprising some market participants. Shares are up 1.5% in premarket trading.
Citigroup says profit fell 34% in the third quarter due to weakness in its consumer banking division. The New York-based bank said Tuesday that third-quarter net income fell to $3.23 billion from $4.91 billion in the year ago quarter. Per share earnings for the latest quarter were $1.40. That result topped Wall Street expectations. The average estimate of nine analysts surveyed by Zacks Investment Research was for earnings of $1.01 per share.
Johnson & Johnson boosted revenue slightly and doubled its third-quarter profit, mainly due to a $4 billion charge for litigation costs in the year-ago quarter. The health care giant handily beat Wall Street expectations and raised its financial forecast for the year. Meanwhile, the New Brunswick, New Jersey-based company disclosed late Monday that it had to temporarily pause its huge, late-stage study of a potential COVID-19 vaccine “due to an unexplained illness in a study participant.” Such pauses are not unusual in big studies, and it’s unknown whether the participant got J&J’s shot or a placebo.
BlackRock Inc’s quarterly results exceeded analysts' estimates on Tuesday helped by broad-based strength in its businesses, as the recovery rally in global financial markets helped world’s largest asset manager end the quarter with a record $7.81 trillion in assets under management.
Walt Disney Co jumped 4.5% as it restructured its media and entertainment businesses to accelerate growth of Disney+ and other streaming services.
Other earnings today include Blackrock Inc. and Citigroup Inc.
Read more: Tuesday’s analyst upgrades and downgrades
(8:30 a.m. ET) U.S. CPI for September. The Street is projecting an increase of 0.2 per cent from August and up 1.4 per cent year-over-year.
With files from Reuters and The Associated Press
This file will be updated