S&P 500 flat on mixed earnings reports; Alphabet weighs on Nasdaq

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(Reuters) – The S&P 500 hovered near its record high on Tuesday, lifted by upbeat earnings from drugmakers Merck and Pfizer, while a disappointing quarterly profit from Google-parent Alphabet kept the Nasdaq firmly in the negative territory.

FILE PHOTO: Traders work on the floor at the New York Stock Exchange (NYSE) in New York, U.S., October 22, 2019. REUTERS/Brendan McDermid

The benchmark index hit its all-time high on Monday, propelled by hopes of a U.S.-China trade deal and expectations of another rate cut by the Federal Reserve.

Merck & Co Inc (MRK.N) rose 2.19% after its quarterly earnings blew past analysts’ expectations, while Pfizer Inc (PFE.N) gained 3% as it raised its 2019 earnings forecast.

Seven of the 11 major S&P 500 sectors were higher, led by the healthcare sector .SPXHC, which rose 0.66%.

Shares of Alphabet Inc (GOOGL.O), however, slipped 2.1% as the web search leader’s quarterly profit missed estimates due to higher costs. Its shares drove a 0.81% fall in the communication services sector .SPLRCL.

Third-quarter earnings of S&P 500 companies have largely been better than expected, with over 78% of the 204 that have reported so far surpassing profit expectations, according to Refinitiv data.

“It’s a little bit of a retracement trade from yesterday’s move in the equity markets. Earnings continue to come somewhat decent with regards to what the management is saying about future earnings,” said John Brady, senior vice president at R.J. O’Brien & Associates in Chicago.

Other marquee names reporting this week include tech heavyweights Apple Inc (AAPL.O) and Facebook Inc (FB.O) as well as oil majors Exxon Mobil Corp (XOM.N) and Chevron Corp (CVX.N).

The office of the U.S. Trade Representative said late on Monday it was studying whether to extend tariff suspensions on $34 billion of Chinese goods set to expire on Dec. 28 this year.

“There is a little bit of a ray of sunshine poking through some very dark clouds in the market with … talks regarding the U.S.-China trade continuing to be more positive than negative, especially from those who are closely involved in it all,” Brady said.

All eyes will now be on the Fed meeting, where the central bank is widely expected to deliver a quarter percentage point interest rate cut for the third time this year amid fears of a global economic slowdown.

At 10:14 a.m. ET the Dow Jones Industrial Average .DJI was down 0.24 points, or unchanged, at 27,090.48, the S&P 500 .SPX was up 0.84 points, or 0.03%, at 3,040.26 and the Nasdaq Composite .IXIC was down 28.58 points, or 0.34%, at 8,297.41.

Beyond Meat Inc (BYND.O) dropped 18% as the vegan burger maker said it would need to offer more store discounts amid rising competition.

Shares of GrubHub Inc (GRUB.N) plunged 40% after the online food delivery company warned of slowing growth as customers opted to choose from a growing pool of rival providers to get better deals.

General Motors Co (GM.N) gained 5.1% after its quarterly net profit topped estimates but the carmaker slashed its earnings forecast for 2019 as the 40-day U.S. labor strike by the United Auto Workers union brought virtually all of its North American operations to a standstill.

Declining issues outnumbered advancers for a 1.13-to-1 ratio on the NYSE and for a 1.33-to-1 ratio on the Nasdaq.

The S&P index recorded 16 new 52-week highs and no new lows, while the Nasdaq recorded 37 new highs and 32 new lows.

Reporting by Arjun Panchadar and Medha Singh in Bengaluru; Editing by Anil D’Silva

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