S&P drops as weak earnings offset strong economic data

NEW YORK (Reuters) - The S&P 500 ended lower on Thursday after a choppy session as disappointing earnings reports from several companies offset strong economic data.

A sharp drop after the open had pushed the S&P 500 and the Dow Jones Industrial Average below their 200-day moving averages, a key technical indicator of longer-term momentum. But both indexes pared losses to rise back above those levels, with the Dow edging up slightly by the market’s close.

The Dow Jones Industrial Average .DJI rose 5.17 points, or 0.02 percent, to 23,930.15, the S&P 500 .SPX lost 5.94 points, or 0.23 percent, to 2,629.73 and the Nasdaq Composite .IXIC dropped 12.75 points, or 0.18 percent, to 7,088.15.

Shares of insurer American International Group Inc AIG.N and drug distributor Cardinal Health Inc CAH.N plunged after the companies reported quarterly results. AIG, down 5.3 percent, and Cardinal Health, down 21.4 percent, were among the biggest drags on the S&P 500.

Despite an overall strong earnings season, investors have seized upon hints that corporate profits may have peaked.

“Good news is now bad news,” said Peter Kenny, senior market strategist at Global Markets Advisory Group in New York. “There’s really nothing to hold equity prices up given that background.”

U.S. economic data provided a more upbeat outlook. The number of Americans receiving unemployment aid fell to its lowest since 1973, and the U.S. trade deficit narrowed for the first time in seven months. Factory orders for March also rose.

Still, some investors expressed concern that economic growth has moderated and that future interest-rate increases by the Federal Reserve could slow growth. On Wednesday, the Fed left rates unchanged but said inflation has moved closer to its 2-percent target.

“It’s holding back the market from responding more positively to the corporate data we’re seeing,” said Anwiti Bahuguna, senior portfolio manager at Columbia Threadneedle Investments in Boston.

Tesla Inc TSLA.O shares fell 5.5 percent after Chief Executive Officer Elon Musk cut off analysts asking about the company's profit potential, despite promises that production of the troubled Model 3 electric car was on track.

Shares of Spotify Technology SA SPOT.N dropped 5.7 percent after the music-streaming company's results, in line with analyst estimates, underwhelmed investors. Spotify made its debut as a public company in April.

Declining issues outnumbered advancing ones on the NYSE by a 1.36-to-1 ratio; on Nasdaq, a 1.80-to-1 ratio favored decliners.

The S&P 500 posted seven new 52-week highs and 37 new lows; the Nasdaq Composite recorded 54 new highs and 81 new lows.

Volume on U.S. exchanges was 7.56 billion shares, compared to the 6.61 billion average over the last 20 trading days.

Additional reporting by Sruthi Shankar in Bengaluru and Sinéad Carew in New York; Editing by Chris Reese and James Dalgleish