Corporate earnings took centre stage here yesterday after the United States central bankers held interest rates steady in line with market expectations.
The Dow Jones Industrial Average fell 0.72 per cent to 23,924, its fourth straight session of decline.
The Straits Times Index (STI) here lost 1.1 per cent, or 39.6 points,to 3,575.68. About 2.2 billion shares worth $1.5 billion were traded, with 147 gainers to 276 losers.
Local banks led the laggards, with DBS Group leading the pack as its shares were quoted ex-dividend yesterday. The stock lost $1.33 or 4.35 per cent to fall to $29.28.
United Overseas Bank dipped 41 cents to $29.58. Nomura kept its buy rating after the bank's first-quarter results came in above consensus.
There were some blue-chip winners though. Singtel rose 20 cents to $3.52 while Venture Corporation added 33 cents to $19.75.
DBS Group Research has raised its year-end target for the STI from 3,715 points to 3,850 on the strong earnings led by banks.
"Near term, good first-quarter results for banks are priced in, with the STI currently trading above 13.51 times the average 12-month forward price to earnings multiple," it said.
DBS analysts noted that the World Cup and stocks do not mix well, adding: "STI fell by an average of 8.6 per cent in the two months between end-April and end-June during the past six tournaments.
"Trading activity tends to slow starting May. A healthy consolidation with the best market re-entry time is in beginning July if history repeats (itself)."
The tournament this year runs from June 14 to July 15.
DBS continues to favour mid-to late-cycle plays such as capital goods, basic materials and commodity-related, consumer services and consumer goods stocks.
Its top picks are Wilmar International and Thai Beverage for consumer goods, Genting, Dairy Farm and Singapore Airlines for consumer services, and Keppel Corporation, Sembcorp Industries and Sembcorp Marine for the oil and gas space.
S-Reits may continue to underperform if the US Federal Reserve signals for a June rate hike.
Companies in a net cash position can better weather rising interest rates, DBS analysts said. Besides lenders UOB, OCBC and Hong Leong Finance, other stocks that fit the bill are Genting Singapore, Yangzijiang, Sheng Siong, SIA Engineering and SingPost.