Wall Street dips after disappointing forecasts from video game companies

By Medha Singh

(Reuters) - U.S. stocks dipped on Wednesday as disappointing forecasts from videogame makers pulled the communications sector lower, but a boost from technology companies kept the indexes near two-month highs.

Electronic Arts Inc slid 14.4 percent after cutting its yearly revenue outlook, while Take-Two Interactive Software Inc fell 12.8 percent after its revenue forecast disappointed investors.

Activision Blizzard Inc also fell 8.7 percent.

Leading the gains on the technology sector was Skyworks Solutions Inc, up 14.2 percent after the analog semiconductor maker announced a $2 billion buyback. The gains also pushed the Philadelphia chip index up 3.11 percent.

"Investors are focusing on earnings and the next big thing, that is trade," said Peter Cardillo, chief market economist at Spartan Capital Securities in New York.

"There is no enthusiasm following last night's State of the Union message and the reason for that is investors are worried about political fighting and that is concerning."

On Tuesday, the President outlined his political priorities for the year and reiterated his vow to build a wall along the U.S.-Mexico border. His reference to the Feb. 15 deadline for a budget deal also reminded investors that a second shutdown was not fully off the table.

U.S. Treasury Secretary Steven Mnuchin told CNBC there was progress in U.S.-China trade talks, but a lot of work still needed to be done ahead of another round of meetings next week to push for a deal before the March 2 deadline.

Optimism on a possible U.S.-China trade truce and the Federal Reserve's signal of ending its monetary policy tightening has now put the S&P 500 about 7 percent away from its record closing high in September.

Earnings have also been contributing to market optimism. About 71 percent of more than half of the S&P 500 companies that have reported earnings have topped profit expectations, according to IBES data from Refinitiv.

At 9:56 a.m. ET the Dow Jones Industrial Average was down 37.22 points, or 0.15 percent, at 25,374.30, the S&P 500 was down 2.80 points, or 0.10 percent, at 2,734.90 and the Nasdaq Composite was down 2.07 points, or 0.03 percent, at 7,400.02.

The communication services sector fell 0.62 percent, the most among the 10 major S&P sectors trading lower.

Capri Holdings Ltd, formerly Michael Kors, jumped 11.5 percent after posting better-than-expected holiday-quarter profit and raising its full-year revenue forecast.

Also on deck is Fed Chairman Jerome Powell's address at 7:00 p.m. ET (0000 GMT) in Virginia.

Declining issues outnumbered advancers for a 1.37-to-1 ratio on the NYSE. Advancing issues outnumbered decliners for a 1.06-to-1 ratio on the Nasdaq.

The S&P index recorded five new 52-week highs and two new lows, while the Nasdaq recorded 17 new highs and eight new lows.

(Reporting by Medha Singh in Bengaluru; Additional reporting by Amy Caren Daniel; Editing by Shounak Dasgupta)