NEW YORK (AP) — U.S. stocks fell Tuesday after weak first-quarter reports from Johnson & Johnson and Goldman Sachs frustrated investors who hope that company earnings are on the rise. Health care companies lost the most.
Wall Street has high hopes for company earnings this spring, and weak results from the world’s largest health care products company and one of the biggest financial firms had them concerned. Johnson & Johnson took its biggest one-day loss in a year. Investors also looked for safety after the British government called for a surprise early election next month. Bond prices and the pound rose and European stock indexes tumbled.
Kate Warne, an investment strategist for Edward Jones, said Goldman Sachs and Johnson & Johnson had a dramatic effect on stocks because investors expect a very strong round of company earnings reports this month. According to S&P Global Markets Intelligence, investors expect first-quarter earnings for S&P 500 companies to rise almost 10 percent compared to last year. That would be the biggest jump since 2014.
“The reason it’s so important is that the stronger growth is likely to support higher stock prices even in the absence of pro-growth policies from the Trump administration,” she said.
The Standard & Poor’s 500 index shed 6.82 points, or 0.3 percent, to 2,342.19. The Dow Jones industrial average lost 113.64 points, or 0.6 percent, to 20,523.28. Goldman Sachs was responsible for most of that loss.
The Nasdaq composite fell 7.32 points, or 0.1 percent, to 5,849.47. The Russell 2000 index of small-company stocks recovered from an early loss and rose 0.71 points, close to 0.1 percent, to 1,361.89.
On Monday stocks made their biggest gain in six weeks. But over the last few weeks they’ve mostly drifted lower while bond yields have fallen to five-month lows.
Johnson & Johnson stumbled after investors were disappointed with its sales. Revenue from its biggest-selling drug, the Crohn’s disease treatment Remicade, fell 6 percent. Meanwhile growth for many consumer health products slowed, and payers demanded bigger rebates on treatments for cardiovascular ailments, diabetes, and primary care products.
The maker of Tylenol and Band-Aids lost $3.90, or 3.1 percent, to $121.82.
Prescription drug distributor Cardinal Health also dropped after it gave weak profit forecasts for this year and next as drug prices continue to fall. It will also pay $6.1 billion to buy a group of businesses from medical device maker Medtronic. Cardinal Health sank $9.44, or 11.5 percent, to $72.39. Competitors AmerisourceBergen and McKesson each fell about 5 percent.
Goldman Sachs’ revenue fell short of investor projections in the first quarter as its highly-regarded trading desks didn’t perform as well as their competitors. The stock gave up $10.6, or 4.7 percent, to $215.59, its biggest loss since June. The stock reached all-time highs above $250 a share in March.
British Prime Minister Theresa May reversed her position by calling for an early general election in June. May formally triggered Britain’s exit from the European Union last month and she intends to seek a stronger parliamentary mandate. The pound climbed after May’s announcement on the hope that the election will result in May getting a better deal for Britain in its talks with the EU. It rose to $1.2848 from $1.2563.
European stocks fell, as the vote creates even more political uncertainty in Europe days before the first round of French presidential voting. Polls don’t give a clear edge to any of the four leading candidates ahead of Sunday’s vote. The top two will advance to a May 7 runoff and investors are unsettled by the chance that either of the far-left or far-right candidates could pull off a victory. Britain’s FTSE 100 dropped 2.5 percent and France’s CAC 40 lost 1.6 percent. In Germany the DAX shed 0.9 percent.
As investors snapped up government bonds, their prices jumped. The yield on the 10-year Treasury note fell to 2.18 percent, its lowest since Nov. 11. It finished at 2.25 percent Monday.
Investors also bought shares of companies that pay big dividends. Household goods makers like Kraft Heinz and Molson Coors, along with utilities, real estate investment trusts and phone companies finished higher.
Streaming video company Netflix sagged after it didn’t gain as many subscribers in the first quarter as investors hoped. Its second-quarter profit guidance also fell short of analyst estimates. Netflix lost $3.89, or 2.6 percent, to $143.36.
U.S. crude oil futures lost 24 cents to $52.41 a barrel in New York. Brent crude, used to price international oils, lost 47 cents to $54.89 per barrel in London.
Wholesale gasoline fell 1 cent to $1.71 a gallon and heating oil dipped 1 cent to $1.62 a gallon. Natural gas lost 2 cents to $3.15 per 1,000 cubic feet.
Gold rose $2.20 to $1,294.10 an ounce. Silver skidded 24 cents, or 1.3 percent, to $18.27 an ounce. Copper fell 7 cents, or 2.6 percent, to $2.53 a pound.
The dollar slipped to 108.42 yen from 108.59 yen. The euro rose to $1.0730 from $1.0642.
The benchmark Nikkei 225 index in Japan added 0.4 percent while South Korea’s Kospi edged up 0.1 percent to 2,148.46. The Hang Seng of Hong Kong shed 1.4 percent.
AP Markets Writer Marley Jay can be reached at http://twitter.com/MarleyJayAP. His work can be found at http://bigstory.ap.org/journalist/marley-jay.