Wall Street drops on Alcoa results

By Margreet Dietz

Traders work on the floor of the New York Stock Exchange. Photo / AP
Traders work on the floor of the New York Stock Exchange. Photo / AP

Wall Street dropped after Alcoa kicked off the US earnings season with quarterly results that missed estimates and an outlook that fell short of expectations.

"Alcoa is always the first off and seen as a bellwether for industrial demand," Chris Gaffney, president of world markets at St. Louis-based EverBank, told Bloomberg. "People need to see strong earnings, especially with the thought that rates will start moving higher. The environment for companies is going to get less accommodating. The drivers today and going forward are going to be earnings."

Shares of Alcoa sank, trading 10.6 per cent lower as of 2.04pm.

"You are coming up against very low expectations, which means the bar is already low," Adam Sarhan, chief executive at Sarhan Capital, told Reuters. "If you can't match those expectations, then investors are going to quickly move to the exit."

Wall Street weakened. In 2.11pm trading in New York, the Dow Jones Industrial Average dropped 1.2 per cent, while the Nasdaq Composite Index retreated 1.7 per cent.

In 1.56pm trading, the Standard & Poor's 500 Index declined 1.4 per cent.

The Dow fell, led by slides in shares of Merck and those of Intel, recently down 2.9 per cent and 2.8 per cent respectively.

Shares of Apple bucked the trend, eking out a 0.2 per cent gain, as rival Samsung Electronics said it stopped production of its fire-prone Galaxy Note 7 smart phone.

"This is the first time that I have seen a product recall go this badly wrong," financial analyst Richard Windsor said in a note to clients, Reuters reported. "When it comes to the damage that it will do to Samsung's brand, we are in uncharted territory."

Also bucking the trend were shares of Tyson Foods, trading 1.2 per cent higher as of 2.17pm in New York. The US meat company agreed to buy a 5 per cent stake in Beyond Meat, a producer of plant-based protein.

The terms of the agreement were not disclosed.

When it comes to the damage that it will do to Samsung's brand, we are in uncharted territory.
Richard Windsor, financial analyst

"We're enthusiastic about this investment, which gives us exposure to a fast-growing segment of the protein market," Monica McGurk, Tyson Foods' executive vice president of strategy and new ventures, said in a statement. "It meets our desire to offer consumers choices and to consider how we can serve an ever-growing and diverse global population, while remaining focused on our core prepared foods and animal protein businesses."

In Europe, the Stoxx 600 Index finished the session with a drop of 0.5 per cent. The UK's FTSE 100 Index and Germany's DAX Index each slid 0.4 per cent, while France's CAC 40 Index gave up 0.6 per cent.

The British pound weakened, recently trading 1.8 per cent weaker against the US dollar after sliding as low as US$1.2090 earlier in the day, as Bank of England policy makers exacerbated concern the UK's negotiations to exit the European Union will further hurt the currency.

"The sentiment on sterling is closely tied to expectations of hard Brexit," Georgette Boele, a currency and commodity strategist at ABN Amro in Amsterdam, told Bloomberg.

- BusinessDesk

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