NEW YORK, N.Y. – Stocks slipped Tuesday afternoon after several U.S. companies delivered disappointing results and forecasts. Ford sank, and so did engine maker Cummins. Energy companies fell more than the rest of the market as the price of crude oil hit two-month lows.
KEEPING SCORE: The Dow Jones industrial average was down 61 points, or 0.4 per cent, to 17,562 as of 2:00 p.m. Eastern time. The Standard & Poor’s 500 index fell 10 points, or 0.5 per cent, to 2,060. The Nasdaq composite fell 17 points, or 0.3 per cent, to 5,017.
OIL SLIDES: Energy stocks declined as the price of U.S. oil fell to its lowest level since late August and oil companies reported sharply lower quarterly earnings.
Benchmark U.S. crude fell $1.06, or 2.4 per cent, to $42.91 a barrel on the New York Mercantile Exchange. Brent crude, which is used to price international oils used in many U.S. refineries, fell 90 cents, or 1.9 per cent, to $46.64 a barrel in London.
Chesapeake Energy fell 52 cents, or 7.4 per cent, to $6.61, while Marathon Oil was down 72 cents, or 4.1 per cent, to $16.86 and Anadarko Petroleum lost $3.62, or 5.3 per cent, to $65.38.
WHERE IS OIL GOING: U.S. oil prices had recovered somewhat after touching six-year lows and briefly dipping under $40 a barrel over the summer. But they recovered some of their losses as companies cut back on production. Energy analyst Jim Ritterbusch said a recent increase in oil stockpiles, the result of decreased refining production, has sent oil prices back down.
“This production decline that’s been supporting crude prices through the late summer early fall period is beginning to dissipate,” he said.
Ritterbusch says he thinks U.S. crude will slip back to its August lows of around $38 a barrel and stay there through the end of 2015.
FEELING HEALTHY: Health care stocks were the sole gainers on the S&P 500 following strong earnings from some of the world’s largest drug companies. Pfizer raised its profit forecast after its third-quarter results were better than expected, while Bristol-Myers said sales of key new medicines like the cancer drugs Opdivo and Yervoy improved. Merck benefited from cost-cutting.
Pfizer shares rose 70 cents, or 2 per cent, to $34.86 and Bristol-Myers shares added $1.58, or 2.4 per cent, to $66.13.
MISSING: Ford reported improved sales of its new F-150 pickup truck, but its net income fell short of Wall Street estimates and the shares lost 73 cents, or 4.7 per cent, and falling to $14.95. UPS slumped after the package delivery company surprised investors by saying its revenue dipped in the third quarter. The stock fell $3.25, or 3.1 per cent, to $102.93. Engine maker Cummins dropped $9.30, or 8.3 per cent, to $102.80 after the company posted disappointing third-quarter results and cut its outlook for the year. Cummins said it will eliminate up to 2,000 jobs.
GAINING: Alibaba, the Chinese e-commerce giant, said it got a big boost from mobile sales in the third quarter. The results reassured investors about Alibaba’s performance while prospects for the Chinese economy remain uncertain. Alibaba shares rose $2.51, or 3.3 per cent, to $78.86. Yahoo, which owns a big stake in Alibaba, picked up 60 cents, or 1.8 per cent, to $34.
CENTRAL BANKS: The Federal Reserve begins its two-day meeting Tuesday. Few expect the Fed to raise interest rates because U.S. inflation is low and the economic recovery remains uneven. The Fed’s key interest rate has been near zero since December 2008, and it wants to start raising interest rates soon. But so far the Fed has held off and is waiting for signs the U.S. economy is on better footing. Bank of Japan policymakers are meeting on Friday and are expected to leave the door open to additional monetary stimulus.
THE VIEW: Patrick Maldari, a senior fixed income investment specialist at Aberdeen Asset Management, said signs of improvement in the U.S. may not show up for a long time. He thinks the economy will begin gaining steam and producing sustained growth when more people are seeking work and they start getting better and higher-paying jobs.
“Nothing about this recovery has been normal,” Maldari said. “It’s going to take many months and probably quarters for us to see a trend toward more sustainability.”
BONDS, CURRENCIES: U.S. government bond prices rose. The yield on the 10-year Treasury note fell to 2.02 per cent from 2.06 per cent late Monday. The dollar fell to 120.38 yen and the euro edged down to $1.1040.
METALS: The price of gold dipped 30 cents to $1,165.90 an ounce. Silver also inched lower while copper gained ground.