Volatility returned to U.S. equities on Thursday as the Dow Jones Industrial Average fell over 200 points after manufacturing giant 3M missed on earnings and revenue for the first quarter. In addition, the company announced a reduction in its 2019 profit expectations, and that it would undertake mass layoffs of 2,000 workers total.

The move to reduce its workforce would result in an estimated annual pretax savings of $225 million to $250 million, according to the company. It’s a blemish on what’s otherwise been a strong first-quarter showing for most companies with the S&P 500 and Nasdaq Composite reaching record closings earlier this week.

Shares of 3M fell as much as 10 percent in the early trading session, which puts the stock on pace for its worst day since Black Monday on October 19, 1987–the largest single day decline in the stock market.

“The first quarter was a disappointing start to the year for 3M,” said CEO Mike Roman in a statement. “We continued to face slowing conditions in key end markets which impacted both organic growth and margins, and our operational execution also fell short of the expectations we have for ourselves.”

“As a result, we have stepped up additional actions, including restructuring o drive productivity, reduce costs, and increase cash flow as we manage through challenges in some of our end markets,” Roman added.

3M earnings results:

  • Earnings per share: $2.23, adjusted vs. $2.49 expected in a Refinitiv survey of analysts
  • Revenue: $7.863 billion vs. $8.025 billion expected in the survey

Nonetheless, some analysts feel this decline is isolated and doesn’t speak to weakness in the broad economy.

“We have other companies that have shorter cycle businesses, too, and they have not seen this type of decline. I don’t think its broader than what we’re seeing, I think it’s fairly 3M specific,” said Scott Davis, chairman and CEO of Melius Research. “The long term reputation of this company is they’re slow to restructure, and when they do, it’s not enough.”

 Slow Growth Expected for Amazon?

Online retail giant Amazon will report its earnings after the closing bell, but is slower growth expected? Analysts are expecting Amazon’s revenue numbers to reveal the slowest growth in four years, but more profitability.

Analysts surveyed by Refinitiv expect Amazon to report revenue of $59.7 billion, which represents an increase of 16.9 percent versus last year. It would mark the weakest period for expansion since the first quarter of 2015 and just below the top end of the guidance range that Amazon had last quarter.

Wall Street expectations:

  • Earnings per share: $4.72, according to analysts surveyed by Refinitiv, vs. $3.27 last year
  • Revenue: $59.7 billion, according to Refinitiv, vs. $51 billion a year ago

“Following (Q4’s) dip below 20% top line growth for the first time in more than three years, it appears that sub-20% growth might be the new normal,” analysts at Canaccord Genuity wrote in a note.

For investors looking for continued upside in U.S. cyclical sectors over defensive sectors, the Direxion MSCI Cyclicals Over Defensives ETF (NYSEArca: RWCD) offers them the ability to benefit not only from cyclical sectors potentially performing well, but from their outperformance compared to defensive sectors.

Conversely, if investors believe that U.S. defensive sectors will outperform cyclical sectors, the Direxion MSCI Defensives Over Cyclicals ETF (NYSEArca: RWDC) provides a means to not only see defensive sectors perform well, but a way to capitalize on their outperformance compared to cyclical sectors.

Subscribe to our free daily newsletters!
Please enter your email address to subscribe to ETF Trends' newsletters featuring latest news and educational events.