S&P 500 dips as economic data, trade worries offset upbeat earnings

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By Stephen Culp

NEW YORK (Reuters) – The benchmark S&P 500 stock index edged lower on Wednesday as weak U.S. economic data and simmering geopolitical tensions spooked buyers away from the equities market, despite a string of generally positive third-quarter corporate earnings reports.

Technology shares, led by Microsoft Inc (O:), weighed on all three major U.S. stock averages, pulling the S&P 500 and the Nasdaq into the red. The Dow was nominally higher.

U.S. retail sales contracted in September for the first time in seven months, according to the Commerce Department, in a sign that cracks might be spreading from the manufacturing sector to the broader economy.

“The retail sales number has surprised people,” said Peter Tuz, president of Chase Investment Counsel in Charlottesville, Virginia. “It’s bringing up ideas that the economy might be slowing down.”

Uncertainty over whether the United States and China could resolve their long-running trade dispute increased after the U.S. House of Representatives riled Beijing by passing pro-democracy legislation in support of Hong Kong.

President Donald Trump said he would probably not sign any trade deal before he meets with Chinese President Xi Jinping at the upcoming APEC Forum in Chile, but said a partial trade deal was being formalized.

“Part of today’s market action concerns whether the tentative (trade) agreement reached last Friday will move forward or not,” Tuz said. “We’ve got two months before significant tariffs go into effect.”

“Things haven’t worked out the way they usually do when earnings season begins and you focus less on the global macro issues that drive the market so much these days.”

Analysts currently expect S&P 500 third-quarter earnings to have fall by 3%, which would mark the first year-on-year contraction since the earnings recession that ended in 2016.

However, of the 43 S&P 500 companies to have posted third-quarter results so far, 86% have come in better than consensus expectations.

Bank of America (N:) rose 2.2% after posting its third-quarter profit beat due to growth in advisory fees and loan book expansion.

United Airlines (O:) advanced 2.6% after the airline beat quarterly profit estimates and increased its 2019 guidance.

The Dow Jones Industrial Average () rose 18.19 points, or 0.07%, to 27,042.99, the S&P 500 () lost 3.71 points, or 0.12%, to 2,991.97 and the Nasdaq Composite () dropped 25.20 points, or 0.31%, to 8,123.51.

Of the 11 major sectors in the S&P 500, three were trading in negative territory, with energy () and tech () suffering the largest percentage losses.

In other stocks news, Eli Lilly & Co (N:) dropped 1.5% in the wake of a late-stage study which showed its experimental pancreatic cancer treatment failed to meet the overall survival goal.

Drug distributors McKesson (N:), AmerisourceBergen (N:) and Cardinal Health (N:) rose between 3% and 6% following a report that they were in talks with state and local governments to settle thousands of opioid lawsuits for $18 billion.

General Motors (N:) rose 1.5% after the automaker reached a tentative labor deal with the United Auto Workers union.

Netflix Inc (O:) shares were up 0.3% in advance of its earnings report, expected after the bell.

Declining issues outnumbered advancing ones on the NYSE by a 1.11-to-1 ratio; on Nasdaq, a 1.09-to-1 ratio favored decliners.

The S&P 500 posted 12 new 52-week highs and no new lows; the Nasdaq Composite recorded 31 new highs and 54 new lows.

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