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S&P 500, Dow slip on worries about earnings, U.S. stimulus outlook

Credit: REUTERS/BRENDAN MCDERMID

Stocks on Wall Street closed little changed on Tuesday, with the Dow and S&P 500 slipping on disappointing earnings and little hope for a U.S. coronavirus stimulus before Election Day, though the Nasdaq rose ahead of big technology company results.

By Herbert Lash

NEW YORK, Oct 27 (Reuters) - Stocks on Wall Street closed little changed on Tuesday, with the Dow and S&P 500 slipping on disappointing earnings and little hope for a U.S. coronavirus stimulus before Election Day, though the Nasdaq rose ahead of big technology company results.

Investor sentiment sagged after the White House said a deal on COVID-19 relief could come in "weeks," meaning a deal is unlikely before the Nov. 3 election.

But the tech-heavy Nasdaq rose as Microsoft Corp MSFT.O firmed in the run-up to its results after the closing bell, and the technology heavyweights kept the S&P 500 slightly in the black for much of the session.

Microsoft beat Wall Street estimates for quarterly revenue which rose 12% to $37.2 billion, as the software giant benefited more from a global shift to work and learning from home.

Shares of drugmaker Eli Lilly and Co LLY.N fell 6.9% after quarterly profits took a hit from increased costs to develop a COVID-19 treatment. A trial of its antibody therapy failed to show a benefit in hospitalized patients.

"This pullback that we've seen is a little bit more of a risk-off move as an additional stimulus package now has been pushed aside," Kevin Flanagan, head of fixed income strategy at WisdomTree Investments, said. "That led to some disappointment."

On Monday, the three major U.S. stock indexes posted their biggest declines in about four weeks on a record number of new coronavirus cases in the United States and some European countries, and as the elusive stimulus rattled investors.

Sectors sensitive to economic growth took a hit. The S&P 500 banks index .SPXBKfell 2.73% and the S&P energy sector .SPNYslid 1.38%.

Meanwhile, Wall Street's fear gauge .VIXrose to its highest level since early September on election jitters.

Democratic challenger Joe Biden leads President Donald Trump in nationwide polls but the race is much tighter in battleground states which should determine the outcome.

The Dow Jones Industrial Average .DJI fell 222.19 points, or 0.8%, to 27,463.19 and the S&P 500 .SPX lost 10.29 points, or 0.30%, to 3,390.68. The Nasdaq Composite .IXIC added 72.41 points, or 0.64%, to 11,431.35.

The Nasdaq advanced in anticipation of results later this week from Apple Inc AAPL.O, Amazon.com AMZN.O, Google-parent Alphabet GOOGL.O and Facebook Inc FB.O. The tech bellwethers together account for more thanone-fifth of the S&P 500's total value.

The NYSE FANG+TM Index .NYFANG rose about 2.15%.

Analysts expect the tech sector to post a 0.4% increase in third-quarter earnings from a year earlier, while overall S&P 500 profit is forecast to fall 16.2%, according to Refinitiv data.

Concerns over a rise in U.S. coronavirus cases are weighing on the market but the technology sector seems to be the least exposed, said Rick Meckler, a partner at Cherry Lane Investments in New Vernon, New Jersey.

"A focus on big technology companies may move this market to rally despite the problems the virus is creating," he said.

Semiconductor designer Advanced Micro Devices Inc AMD.O fell 4.1% after it agreed to buy Xilinx Inc XLNX.O in a $35 billion all-stock deal. Xilinx shares soared 8.6%, the largest percentage gainer on the S&P 500, while those of AMD-rival Intel INTC.O fell 2.3%.

Shares of Franklin Resources Inc BEN.N fell 13.6%, the largest decliner on the S&P 500, as the money manager reported quarterly adjusted earnings of 56 cents per share, below analysts' expectations.

(Reporting by Herbert Lash, additional reporting by Medha Singh and Shivani Kumaresan in Bengaluru; editing by Saumyadeb Chakrabarty, Anil D'Silva and David Gregorio)

((herb.lash@thomsonreuters.com; 1-646-223-6019; Reuters Messaging: herb.lash.reuters.com@reuters.net))

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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