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Wall Street Edges Lower amid Pronounced Weakness in Health Care Stocks
17-Apr-19 16:25 ET
Dow -3.12 at 26449.54, Nasdaq -4.15 at 7996.07, S&P -6.61 at 2900.45

https://www.briefing.com/investor/markets/stock-market-update/2019/4/17/wall-street-edges-lower-amid-pronounced-weakness-in-health-care-stocks.htm

[BRIEFING.COM] The S&P 500 declined 0.2% on Wednesday in a mixed trading session. Pronounced weakness in the S&P 500 health care sector (-2.9%) counteracted positive economic data and earnings reports, thwarting an early attempt from the benchmark index to re-test its all-time high. The S&P 500 finished right at the 2900 level.

The Dow Jones Industrial Average finished flat, and the Nasdaq Composite lost 0.1%. The small-cap Russell 2000 underperformed with a loss of 1.0%.

Stocks began the day modestly higher following better-than-expected GDP data out of China and earnings beats from many widely-held companies. The overall response, however, was muted likely due to the sense that much of the good news had already been priced in. An afternoon report from the Wall Street Journal indicating that the U.S. and China plan to continue another round of trade talks at the end of the month also produced little reaction.

Health care stocks, meanwhile, continued to remain out of favor amid political pressure to curb rising health care costs, which is likely to continue throughout the 2020 presidential campaign trail. The sense that there would be an opportunity cost in remaining in the sector overshadowed a positive earnings report from Abbott Labs (ABT 72.88, -3.50, -4.6%).

Some corporate news out of the semiconductor industry and positive reactions to earnings reports from transportation companies, however, provided offsetting support for the broader market. The Philadelphia Semiconductor Index increased 1.6%, and the Dow Jones Transportation Average increased 1.0%.

Shares of Qualcomm (QCOM 79.08, +8.63, +12.3%) received follow-through buying interest after the company settled a licensing dispute with Apple (AAPL 203.13, +3.88, +2.0%) yesterday. Intel (INTC 58.56, +1.85, +3.3%) followed up with an announcement that it will drop out of the 5G smartphone modem business.

Strength in the semiconductor stocks, and Apple, helped the S&P 500 information technology sector (+0.6%) brush past weakness from IBM (IBM 139.11, -6.03, -4.2%), which fell on a revenue miss.

United Continental (UAL 89.24, +4.07, +4.8%), CSX Corp. (CSX 78.94, +3.05, +4.0%), and KC Southern (KSU 122.81, +4.82, +4.1%) were some of the transport companies that released solid earnings results. PepsiCo (PEP 127.01, +4.60, +3.8%), Netflix (NFLX 354.74, -4.72, -1.3%), and Morgan Stanley (MS 48.26, +1.24, +2.6%) also beat earnings estimates, but Netflix also guided Q2 EPS below consensus.

U.S. Treasuries finished little changed in another tight-ranged session. The 2-yr yield decreased one basis point to 2.40%, and the 10-yr yield was unchanged at 2.59%. The U.S. Dollar Index finished flat at 97.01. WTI crude lost 0.4% to $63.78/bbl.

Reviewing Wednesday's economic data, which included the Trade Balance Report for February, Wholesale Inventories for February, the weekly MBA Mortgage Applications Index, and the Fed's Beige Book for April:

The trade deficit narrowed to $49.4 billion in February (Briefing.com consensus -$54.0 billion) from -$51.1 billion in January, as exports were $2.3 billion more than January exports and imports were $0.6 billion more than January imports.
The key takeaway from the report is that exports and imports increased in February. That will help temper concerns about the U.S. economy being at risk of slipping into a recession in the near future.
Wholesale inventories increased 0.2% in February on top of a downwardly revised 1.2% increase (from 1.4%) in January. Wholesale sales were up 0.3% following an unrevised 0.5% increase in January.
The key takeaway from the report is that inventory growth continues to outpace sales growth on a year-over-year basis, which should help keep price pressures in check.
The MBA Mortgage Applications Index declined 3.5% following a 5.6% decrease in the prior week.
The Federal Reserve's April Beige Book described the expansion in overall economic activity as "slight-to-moderate." Most Districts saw activity comparable to what was reported in the March Beige Book.

Looking ahead, investors will receive the following economic data on Thursday: Retail Sales for March, the weekly Initial and Continuing Claims report, the Philadelphia Fed Index for April, Business Inventories for February, and the Conference Board's Leading Economic Index for March.

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