While you were sleeping: IBM, Tesla plunge

Wednesday 21st October 2015

Wall Street slipped as a drop in shares of IBM on disappointing earnings outweighed those that beat expectations such as United Technologies and Travelers.

In New York trading at about 1.36pm, the Dow Jones industrial average slipped 0.13 percent, while the Standard & Poor’s 500 Index dipped 0.14 percent, and the Nasdaq Composite Index fell 0.50 percent.

In the Dow, declines in shares of IBM and those of Merck, last down 5.8 percent and 1.8 percent respectively, outweighed increases in shares of United Technologies and those of Travelers, last up 5.1 percent and 2.5 percent respectively.

United Technologies shares climbed after the company announced a new US$12 billion share buyback program.

"United Technologies' shares are an attractive investment opportunity which we are going to take advantage of in order to increase value for our shareholders," Gregory Hayes, UTC chief executive officer, said in a statement. "Including the US$4 billion in repurchases made to date in 2015, we now expect to complete US$16 billion of share repurchases through 2017."

In contrast, IBM’s latest results underpinned concern about the company’s outlook.

"We believe that IBM faces a long transition driven by pressure in legacy business units/products that are greater than the impact of strategic imperatives," BMO Capital Markets analyst Keith Bachman wrote in a note, according to Reuters. “Moreover, this quarter we saw meaningful weakness in software margins.”

Other tech shares including Amazon.com and Netflix also declined. Amazon will report its latest quarterly results later in the week.

Shares of Tesla plunged, last 10.2 percent lower, after Consumer Reports dropped the company’s Model S luxury electric car from its recommended list because of its worse than average reliability.

US Treasuries fell, pushing yields on the 10 year note four basis points higher to 2.06 percent.

A Commerce Department report showed US housing start climbed 6.5 percent to a seasonally adjusted annual pace of 1.21 million units, exceeding expectations and adding to signs of strength in the industry.

“The underlying story is that housing demand is quite strong, and builders are slowly but surely ramping up their groundbreaking to meet the need,” wrote Stephen Stanley, chief economist at Amherst Pierpont Securities, according to Bloomberg.

In Europe, bonds also moved lower. A European Central Bank report tempered bets that eurozone policy makers are gearing up to add monetary stimulus by increasing their bond purchase program at their meeting on Thursday.

“The ECB’s Bank Lending Survey is responsible for yields creeping higher,” Felix Herrmann, a market analyst at DZ Bank in Frankfurt, told Bloomberg. “Investors have probably taken this as a hint toward” a less dovish statement on Thursday.

Europe’s Stoxx 600 Index ended the day with a 0.4 percent decline from the previous close. The UK’s FTSE 100 Index slipped 0.1 percent, Germany’s DAX Index fell 0.2 percent, and France’s CAC 40 Index dropped 0.6 percent.

BusinessDesk.co.nz

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