Via AP Business

NEW YORK (AP) — U.S. stock indexes pulled further back from their record highs on Thursday after a cavalcade of industrial companies turned in weak earnings reports, blotting out a set of blowout results from big-name tech companies.

3M, the maker of Scotch tape and various products for businesses, reported lower revenue and profit for the first three months of the year than Wall Street expected. It also slashed its profit forecast for the full year. United Parcel Service said its net income fell 17% on nearly flat revenue, and Illinois Tool Works had weaker revenue than analysts forecast. Rockwell Automation said that automotive related sales were less than it expected last quarter.

They all helped drag industrial stocks to the sharpest loss by far among the 11 sectors that make up the S&P 500, and 3M’s loss dealt a particularly big blow to the Dow Jones Industrial Average.

The struggles for industrial stocks overshadowed strong earnings reports from Facebook and Microsoft.

Tech companies have been leading the way this year, as the S&P 500 index returned to a record this week on expectations that they can continue to deliver strong growth despite a slowing global economy. And many are delivering: Revenue jumped 14% for Microsoft and 26% for Facebook from a year ago.

Earnings reporting season is about a third of the way in, and investors are searching for clues about whether profit growth can accelerate later this year following a weak first quarter. The stock market has had a furious rally this year, largely because the Federal Reserve has said that it is halting its plan to raise interest rates, at least temporarily.

READ ALSO  The enormous potential of social media to measure human culture

KEEPING SCORE: The S&P 500 was down 0.2% as of 10:45 a.m. Eastern time.

The Dow Jones Industrial average was down 230 points, or 0.9%, at 26,366, and the Nasdaq composite rose 0.1%.

EARNINGS WOES: 3M plunged 10.7%, UPS lost 8.7%, Illinois Tool Works fell 4% and Rockwell Automate sank 5.5% following their earnings reports.

Raytheon, a defense contractor that is also in the industrial sector, sank 5.4%. It reported stronger profit for the latest quarter than expected, but analysts noted some mixed results for its profit margins.

Altogether, the companies helped drag industrial stocks in the S&P 500 down by 2.1%.

EARNINGS WINS: Facebook surged 6.1% following its earnings report, and it helped communications companies in the S&P 500 jump 1.2% for the biggest gain among the 11 sectors that make up the index.

Microsoft rose 3.8%.

THE POWER OF LOW EXPECTATIONS: Coming into this earnings reporting season, Wall Street was expecting a dud. Partially because of slowing economic growth around the world, analysts were forecasting the first drop in earnings for the S&P 500 in nearly three years.

Companies, though, have been surprising analysts with not-as-bad results. So far, about 190 of the companies in the S&P 500 have reported their earnings for the first three months of the year. Among them, earnings actually grew 2.1% from a year earlier.

All the better-than-expected results mean analysts are now forecasting a drop of 2.8% in earnings for S&P 500 companies this reporting season. That’s not as bad as the 4% decline they were expecting a few weeks ago.

READ ALSO  SE: WHO Says Herd Immunity Causes More Deaths, Longer Recoveries

MARKETS ABROAD: European stocks struggled following news that two potential mergers won’t be going ahead. In the U.K., regulators blocked Sainsbury’s 7.3 billion-pound ($9.4 billion) purchase of Walmart’s Asda unit amid concerns the deal would have increased prices and reduced the quality and range of products available.

And in Germany, Deutsche Bank and Commerzbank said they were halting talks on a possible merger that aimed to create a stronger global banking player, saying it would be too risky and costly.

Germany’s DAX slipped 0.5%, Britain’s FTSE 100 lost 0.8% and France’s CAC 40 index fell 0.6%.

In China, the Shanghai market dropped 2.4% amid signs the country’s central bank plans to avoid major stimulus moves amid signs the economy is stabilizing.

State media reported that the People’s Bank of China’s latest injection of liquidity showed the use of target support rather than what the Xinhua News Agency described as a “scattergun approach.”

In Japan, the Nikkei 225 rose 0.5%, and South Korea’s Kospi lost 0.5%.