By Anora Mahmudova and Carla Mozee, MarketWatch
Morgan Stanley disappoints; Delta and Halliburton top
estimates
NEW YORK (MarketWatch) -- U.S. stocks trimmed losses but
remained under pressure Tuesday, weighed down by escalating
nervousness over deflationary pressures that have sent investors
flocking to haven assets such as gold and government bonds.
A renewed slide in oil prices led to pressure on stocks, with
investors increasingly skeptical about the ability of central banks
to combat deflationary forces.
The European Central Bank is widely expected to announce a
government-bond-buying program on Thursday; however, the program's
scope may disappoint investors.
U.S. markets were closed on Monday in observance of the Martin
Luther King Jr. holiday.
The S&P 500 (SPX) declined 3.58 points, or 0.2%, to trade at
2,015.84.
The Dow Jones Industrial Average (DJI) saw a triple-digit fall,
but trimmed losses in earlyh afternoon activity to change hands at
17,443.40, a loss of 68.11 points, or 0.4%. Johnson & Johnson
was the top decliner among the blue chips, falling nearly 3.4%.
The Nasdaq Composite (RIXF) erased a loss to trade at 4,635.97,
reflecting a gain of less than 0.1%.
Ten-year Treasurys rallied, sending the yield down more than
five basis points to 1.784%. The yield on the benchmark debt has
steadily declined over the past 12 months.
"The big elephant in the room is deflation, and many portfolio
managers are beginning to adjust their models to work in a
low-interest-rate environment," said Marty Leclerc, chief
investment officer of Barrack Yard Advisors. "That adjustment
period spells volatility."
Leclerc stressed that in the short term the environment will be
favorable for stocks, as investors may justify higher
price-to-earnings ratios when real interest rates are at zero.
Peter Cardillo, chief market economist at Rockwell Global
Capital, said the day's action is all about the fear of a global
economic slowdown. "We are in the midst of earnings, and markets
are not reacting to positive results, and the culprit is concern
about Asia and Europe," he said. "The bond market is afraid of
deflation, which is why we are seeing such low yields on long-dated
Treasurys."
In economic news, a gauge of confidence among home builders
ticked down this month by one point to 57, staying close to the
highest level since late 2005, according to National Association of
Home Builders/Wells Fargo data released Tuesday morning. Readings
above 50 signal that builders, generally, are optimistic about
sales trends.
Home-builder stocks were down sharply. PulteGoup Inc. (PHM), and
D.R. Horton Inc. (DHI) both fell more than 4%.
Stock futures had been climbing after better-than-expected
economic data from China, whose gross domestic product expanded
7.4% last year, beating market expectations of 7.2%. Still, that
marked the slowest rate of growth since 1990 for the world's
second-largest economy. Meanwhile, European equities traded near
seven-year highs ahead of an expected unleashing of a
sovereign-bond-buying plan by the European Central Bank when policy
makers meet Thursday.
Earnings results: Morgan Stanley's (MS)quarterly results missed
analyst expectations, and shares fell.
Delta Air Lines Inc. shares (DAL) jumped after the company beat
estimates,reporting fourth-quarter revenue of $8.24 billion, up
4.6%.
Shares of Halliburton Co.(HAL) edged higher after the company
reported better-than-expected results but warned that 2015 could be
a challenging year for the oil-field servicing company, which is
planning to acquire Baker Hughes Inc. (BHI)
Consumer-products heavyweight Johnson & Johnson (JNJ) beat
profit expectations, but sales fell shy of estimates.
SAP SE (SAP) dropped its midterm profit-margin forecast and
reported a 1% decline in fourth-quarter profit, hurt by its shift
to cloud-based products.
Google Inc. (GOOG) is close to investing about $1 billion in
Space Exploration Technology Corp. to support its effort to deliver
Internet access via satellites, according to the Wall Street
Journal. Space X is backed by Tesla Motors Inc. (TSLA) chief Elon
Musk.
Twitter Inc.(TWTR) in a blog post Tuesday said it's buying
India-based mobile-marketing company ZipDial for an undisclosed
sum.
DreamWorks Animation SKG Inc.(DWA) last week started letting
workers go, the Wall Street Journal reported.
Other markets: Chinese stocks rose nearly 2% after Monday's
selloff and Japan's Nikkei Average closed 2.1% higher, its
strongest percentage gain in a month.
Gold futures (GCG5) were up more than 1%. Oil futures (CLH5)
fell more than 4%, trading at about $47 a barrel.
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