US airlines were on a strong footing on Tuesday after Delta reported positive passenger and revenue numbers, while US indices closed in negative territory.
Delta Air Lines reported that traffic and per-seat revenue both rose, sending the company’s stock up 1.6 per cent to $18.09. That helped lift other major carriers in early trading, though the broader market sell off pared gains. United Continental finished up 0.1 per cent to $32.20, AMR Corporation, the parent of American Airlines, advanced 1.9 per cent to $5.27, and Southwest Airlines fell 0.6 per cent to $13.92.
“There was some misplaced investor anxiety that demand for air travel had incrementally weakened during the month of May,” said Jamie Baker, analyst for JPMorgan. “Operating statistics released by Delta this morning suggest that wasn’t the case, hence airline stocks in general are trading up as investors express relief. Concern has yielded to relief, driving shares modestly higher after an otherwise lacklustre month for many airline stocks.”
The S&P 500 fell 0.6 per cent to 1,631.38 on Tuesday, with eight of 10 sectors finishing lower. Financials and energy stocks were hardest hit. The benchmark has alternated between positive and negative territory in the last seven sessions, losing 1.2 per cent in that period.
The Nasdaq Composite Index lost 0.6 per cent at 3,445.26. The Dow Jones Industrial Average closed down 0.5 per cent at 15,177.54.
Investors are focused on any economic data that might yield signs about a Fed decision on winding down its stimulus programme. Esther George, president of the Kansas City branch of the Fed who has tried to push for a slowing of quantitative easing, said in a speech: “It [slowing QE] would importantly begin to lay the groundwork for a period when markets can prepare to function in a way that is far less dependent on central bank actions and allow them to resume their most essential roles of price discovery and resource allocation.”
Cloud computing deals by IBM and Salesforce announced on Tuesday morning did little for their share prices. Salesforce.com said it would buy cloud marketing platform ExactTarget for $2.34bn, prompting a 7.9 per cent fall in the shares to $37.80. IBM’s announcement that it would acquire cloud computing group SoftLayer Technologies saw shares in the blue-chip stock weakening by 1.3 per cent to $206.19.
The semiconductor sector shook off the broader sell off and continued its strong run so far this year, adding another 0.6 per cent. Intel rose 0.5 per cent to $25.36, Texas Instruments added 1.7 per cent to $36.64 and Altera gained 1.6 per cent to $33.67.
Investors in big insurance groups largely took in their stride news that AIG and Prudential Financial were labelled “systemically important” by US regulators, meaning the companies will be put under tighter supervision.
AIG shares eased 1.5 per cent to $44.10 while Prudential lost 0.7 per cent to $69.07.
“We do not believe investors will be surprised by this news, as AIG has communicated frequently to investors that it expected to be designated a SIFI and we believe it has planned its strategies accordingly,” said Cathy Seifert, analyst at S&P Capital IQ, in a note. The research group owned by McGraw-Hill Financial has maintained its “buy” rating on AIG.
Discount retailer Dollar General reported first quarter sales that fell short of expectations and lowered its profit forecast for the year, sending shares down 9.2 per cent to $48.64. That helped drag down similar companies, with Family Dollar down 2.2 per cent to $60.17, and Big Lots off 0.2 per cent at $33.20.