Benchmarks ended in the red on Tuesday, dragged down by declines in biotech and healthcare stocks. Decline in IBM's quarterly revenues along with lowered earnings guidance for this year also had a negative impact on the broader markets. Shares of the tech-behemoth dropped to an almost five year low on Tuesday. Meanwhile, investors assessed a barrage of corporate earnings report and the encouraging housing starts data.
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The Dow Jones Industrial Average (DJI) declined 0.1% to close at 17,217.11. The Standard & Poor's 500 (S&P 500) also dropped 0.1% to close at 2,030.77. The tech-laden Nasdaq Composite Index closed at 4,880.97, decreasing 0.5%. The fear-gauge CBOE Volatility Index (VIX) gained 5.1% to settle at 15.75. A total of around 6 billion shares were traded on Tuesday, lower than the last 20-sessions' average of 7.3 billion. Advancers outpaced declining stocks on the NYSE. For 59% stocks that advanced, 38% declined.
Decline in biotech and healthcare companies dragged benchmarks into negative territory on Tuesday. Concerns about high drug pricing had a negative impact on these companies. United States Senator from Florida, Marco Rubio, said that drug manufacturers are getting involved in "pure profiteering" and that high drug prices threatens to "bankrupt our system."
Biotech stocks including Celgene Corporation ( CELG ), Amgen Inc. ( AMGN ), Gilead Sciences Inc. ( GILD ), Regeneron Pharmaceuticals, Inc. ( REGN ) and Biogen Inc. ( BIIB ) decreased 2.7%, 2.6%, 1.9%, 1.7% and 2.6%, respectively. Shares of drug makers Merck & Co., Inc. ( MRK ) and Pfizer Inc. ( PFE ) dropped 1.9% and 1.5%, respectively. While the iShares Nasdaq Biotechnology (IBB) fell 3.2%, the broader Health Care Select Sector SPDR ETF (XLV) declined 1.6%, the highest among the S&P 500 sectors.
International Business Machines Corporation's ( IBM ) disappointing quarterly results also weighed on the broader markets. Shares of IBM declined 5.8% to $140.64, its lowest closing level since Oct 25, 2010. IBM's shares took a beating after reporting fourteenth successive quarterly decline in revenues. The company posted third quarter revenues of $19.28 billion that fell short of the Zacks Consensus Estimate of $19.64 billion. However, earnings per share for the reported quarter came in at $3.34, beating the Zacks Consensus Estimate by a cent.
Separately, the company lowered its earnings per share guidance for this year. For 2015, the company expects earnings per share in the range of $14.75 to $15.75, lower than an earlier projection of $15.75 to $16.50.
Meanwhile, Harley-Davidson, Inc. ( HOG ) turned out to be the biggest laggard among the companies listed in the S&P 500. Shares of Harley-Davidson plunged 13.9% after the company reported third quarter earnings per share of 69 cents, missing the Zacks Consensus Estimate of 78 cents.
On the other hand, United Technologies Corporation ( UTX ) gained 3.9% after the company posted third quarter earnings per share of $1.67 that beat the Zacks Consensus Estimate of $1.54. Verizon Communications Inc. ( VZ ) also reported third quarter earnings per share of $1.04, beating the Zacks Consensus Estimate of $1.02. The Travelers Companies, Inc. ( TRV ) too posted third quarter earnings per share of $2.93 that surpassed the Zacks Consensus Estimate by 32.6%. Shares of United Technologies, Verizon Communications and Travelers Companies advanced 3.9%, 1.2% and 2.5%, respectively.
Including these reports, about 77 S&P 500 members have reported third quarter earnings results so far. Among the 77 members, earnings are up 0.9% on 1.6% lower revenues.
In economic news, the U.S. Department of Commerce reported that housing starts increased 6.5% from August to a seasonally adjusted annual rate of 1,206,000 in September, higher than the consensus estimate of 1,144,000. However, building permits in September declined 5% from August's figure to 1,103,000, in contrast to the consensus estimate of building permits increasing to 1,173,000.
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
