Investors grew cautious Tuesday after quarterly sales from Johnson & Johnson fell short of expectations and an influential analyst warned that bank shares are overheated.
NEW YORK (AP) — Investors grew cautious Tuesday after quarterly sales from Johnson & Johnson fell short of expectations and an influential analyst warned that bank shares are overheated.
Most stocks posted modest losses Tuesday, a day after major indexes finished at their best levels in a year. The Dow Jones industrial average slipped 15 points, though the Nasdaq composite index edged higher.
J&J was the first in a parade of big companies to report quarterly results this week, and a 5 percent drop in sales at the maker of health care products stirred concerns that companies have had to rely on cost-cutting to boost profits, as they did in the first half of the year. Investors are worried that earnings will suffer if sales don’t improve.
The market’s unease intensified after analyst Meredith Whitney lowered her rating on Goldman Sachs Group Inc. to “neutral” from “buy.” The bank’s stock had risen 34 percent since Whitney upgraded the stock to “buy” in mid-July. Goldman reports results from the latest quarter on Thursday.
Health care stocks stumbled after J&J’s report and as the Senate Finance committee approved a version of the health care overhaul bill. The bill moves to the Senate floor for debate.
There were pockets of green on trading screens. An agreement by Cisco Systems Inc., which makes computer networking gear, to buy Starent Networks Corp. for $2.9 billion lifted shares of technology companies.
The day’s modest slide signaled that traders are afraid of walking away from a market that has spent little time in reverse since bouncing off 12-year lows seven months ago.
Earnings reports are likely to shape sentiment this week as investors look for any signs that companies are making money because of increasing demand. J&J’s report left investors cautious.
“The market only makes sense at these levels if earnings can grow at a decent pace,” said Jerry Webman, chief economist at OppenheimerFunds Inc. “What we’re hearing now is OK, but you don’t get long-term earnings growth out of cost cutting.”
According to preliminary calculations, the Dow fell 14.74, or 0.2 percent, to 9,871.06. The Dow on Monday came within 69 points of the psychological barrier of 10,000, a level not seen in a year.
The Standard & Poor’s 500 index fell 3.00, or 0.3 percent, to 1,073.19, its first loss after six days of gains. The Nasdaq rose 0.75, or less than 0.1 percent, to 2,139.89.
Three stocks fell for every two that rose on the New York Stock Exchange, where volume came to a light 1.1 billion shares compared with 946.8 million Monday.
In other trading, the dollar fell against other currencies, sending commodities higher. Bond prices rose, recovering some of the steep losses from last week.
Investors around the globe have sent stocks higher in recent days on hopes that third-quarter earnings reports, which arrive in greater numbers this week, will exceed expectations and validate hopes that the economy is on the mend.
This week, investors will look to reports from major U.S. banks including JPMorgan Chase & Co., which reports on Wednesday. Goldman Sachs and Citigroup Inc. and Bank of America Corp. report later in the week. Goldman fell $2.92, or 1.5 percent, to $187.23.
Johnson & Johnson fell $1.52, or 2.4 percent, to $61.01.
The ICE Futures U.S. dollar index, which measures the dollar against other major currencies, dropped to a 14-month low. Gold subsequently hit a record high $1,069.70 an ounce, while oil rose 88 cents to settle at $74.15 a barrel on the New York Mercantile Exchange.
Bond prices rose, pushing yields down. The yield on the benchmark 10-year Treasury note fell to 3.33 percent from 3.38 percent late Friday. Bond markets were closed Monday in observance of Columbus Day.
The Russell 2000 index of smaller companies fell 2.11, or 0.3 percent, to 611.70.
Overseas, Britain’s FTSE 100 fell 1.1 percent, while Germany’s DAX index and France’s CAC-40 each fell 1.2 percent. Japan’s Nikkei stock average rose 0.6 percent.