By Sue Chang and Chris Matthews, MarketWatch
Corporate earnings paint mixed picture of economy
U.S. stocks closed lower Wednesday as the health-care sector slumped on concerns over potential adverse impact from future policy changes. Investors also parsed a steady stream of corporate earnings and the latest snapshot of the economy via the Federal Reserve's Beige Book.
What did major indexes do?
S&P 500 index shed 6.61 points, or 0.2%, to 2,900.45, and the Dow Jones Industrial Average fell 3.12 points to 26,449.54. The Nasdaq Composite Index declined 4.15 points to 7,976.08.
What drove the market?
Health-care shares dropped 2.9%, with insurers Athem Inc. (ANTM), Cigna Corp and Dow component UnitedHealth Group all notable losers. Analysts pointed to the debate over health-care reform , which has taken center stage in the race for the Democratic nomination for president, and which could significantly affect profits in the managed care and health-services sectors if reform legislation is ultimately passed.
Health care is the only one of the S&P 500's 11 sectors to fall into negative territory year to date, slipping 0.9%.
Investors continue to wade through corporate results as first-quarter earnings season moves into full swing. International Business Machines results fell short of expectations, triggering the stock to fall and weigh heavily on the Dow. IBM shares were off 4.2%.
Most of the 12 districts monitored by the Fed showed economic activity grew at a "slight-to-moderate" pace in March and early April, according to the central bank's Beige Book compilation. However, retail and automobile sales were sluggish while the labor market remained tight, increasing upward pressure on wages, indicating conflicting views on the economy depending on the sector.
Chinese government data showed the country's economy grew 6.4% year-over-year in the first quarter of 2019, maintaining the pace seen in the last quarter of 2018 as factory output picked up steam. The figure was slightly higher than many economists expected.
The data failed to provide a spark to global markets, but analysts said signs of stability could soothe investor worries about the world's second-largest economy. Stock-market gains since the end of last year have been tied in part to expectations for stimulus efforts by Chinese authorities and a potential deal to end the U.S.-China trade battle that would limit the scope of the country's slowdown and alleviate fears of a global economic crunch.
The U.S. trade deficit fell 3.4% in February to the lowest level in eight months , the Commerce Department said. Meanwhile, wholesale inventories in the U.S. rose a mild 0.2% in February and sales increased 0.3%.
What were analysts saying?
"We're in the early days of earnings season, but it feels like first-quarter earnings will be a bottom, and that's getting baked into expectations," Kevin Divney, senior portfolio manager at Russell Investments, told MarketWatch.
"The week after next is when we have the bulk of earnings, so we're at a pause here" as investors don't yet have a broad enough picture of management expectations for the remainder of the year, he added.
"It's still much too small a sample size to generate conclusions, but the bottom line is that earnings season is not off to a very good start," wrote Tom Essaye, president of the Sevens Report in a research note. "While stocks are looking past that courtesy of dovish Fed speak and hopes of better global growth, earnings will need to get better during the next two weeks--because so far the results, while not a disaster, aren't that great."
What stocks were in focus?
Shares of Netflix were down 1.3% after whipsawing following the release of its first-quarter earnings late Tuesday. The company announced a record number of subscribers , but issued guidance for the second quarter that some have interpreted as disappointing.
Shares of Qualcomm rallied 12% a day after the chip maker and Applesettled patent litigation against each other. Apple shares gained 2%.
Opinion:Qualcomm gets big windfall in surprise settlement, but Apple may have saved the iPhone from 5G doom
Subsequently, Intel said it would get out of the business for 5G modem chips in which it was trying to compete with Qualcomm. Intel shares were up 3.3%.
Shares of Pepsi rose 3.8% after the beverage and snack giant reported first-quarter profit and revenue that topped Wall Street expectations .
Shares of Bank of New York Mellon Corp. (BK) slumped 9.5% after the financial services company reported sharper declines in first-quarter sales and profits than Wall Street had expected.
Morgan Stanley stock rose 2.6% after the financial company reported first-quarter profit and revenue that fell less than projected.
Shares of United Continental Holdings gained 4.8% following quarterly earnings that beat analyst forecasts .
How did other markets trade?
Stocks in Asia closed mostly higher , with China's Shanghai Composite Index and Japan's Nikkei 225 both rising 0.3%. Hong Kong's Hang Seng Index, meanwhile, ended the day flat.
In Europe, stocks edged higher , with the Stoxx Europe 600 up 0.1%.
In commodities markets, the price of crude oil was under pressure and gold prices settled mostly flat . The U.S. dollar eased against its peers .
--William Watts contributed to this report