Equities close lower as rise in yields overshadows earnings

  • US 10-year Treasury yield at highest since July 2008
  • Netflix jumps after reversing customer losses
  • Procter & Gamble and Travelers post positive results
  • PHLX housing index drops on weak US housing data
  • Dow down 0.33%, S&P 500 down 0.67%, Nasdaq down 0.85%

NEW YORK, Oct 19 (Reuters) – U.S. stocks posted a two-day winning streak on Wednesday as weakness in Abbott Laboratories shares (ABT.N) and a rise in Treasury yields sank momentum from the current earnings season and offset a rise in Netflix Inc. (NFLX.O) shares.

The yield on the 10-year U.S. Treasury rose to its highest level in more than 14 years as weak housing data did little to alter expectations that the Federal Reserve will remain aggressive in raising interest rates. interest as it tries to fight stubbornly high inflation.

Rising yields weighed on rate-sensitive stocks like real estate (.SPLRCR) stocks, down 2.56% as the worst performing S&P sector of the day, and megacap growth names such as Microsoft Corp (MSFT.O) and Amazon.com Inc. (AMZN.O). Energy (.SPNY) was the only S&P sector to end the session in positive territory with a 2.94% gain.

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Abbott Laboratories fell 6.5% after reporting weaker-than-expected growth in international medical device sales, hit by a strong dollar and supply issues in China.

Shares of Netflix, however, jumped 13.1% as the top performerP 500 after attracting 2.4 million new subscribers worldwide in the third quarter, more than double consensus forecasts, and guiding for 4 .5 million additions by the end of the year.

“Bonds weigh so heavily on it…it’s a shame to see good revenue wasted,” said JJ Kinahan, CEO of IG North America in Chicago.

“Earnings ultimately drive stocks but when they’re overshadowed it’s hard to have that optimism, but ultimately good earnings will drive stocks up, it’s a matter of knowing in how much the macroeconomic situation will continue to hurt these earnings.”

The Dow Jones Industrial Average (.DJI) fell 99.99 points, or 0.33%, to 30,423.81, the S&P 500 (.SPX) lost 24.82 points, or 0.67%, to 3,695.16 and the Nasdaq Composite (.IXIC) fell 91.89 points, or 0.85%, to 10,680.51.

Fed officials were largely in sync in their public comments about the need to be aggressive in raising rates to fight inflation. On Wednesday, Minneapolis Federal Reserve Chairman Neel Kashkari said labor market demand remained strong and underlying inflationary pressures likely hadn’t peaked yet.

The Fed’s “Beige Book” survey of economic activity showed businesses noted pricing pressures remained elevated, although there was some easing in several districts, while the labor market showed signs of cooling.

The US central bank is expected to raise rates by 75 basis points for the fourth straight time at its November meeting.

The Fed’s effect on the housing market continues to grow. Housing starts, a measure of new residential construction, fell 8.1% in September, the latest sign that the economy is running out of steam.

Housing starts Building permits

The PHLX Housing Index (.HGX) fell -4.50%, marking another sector unlikely to help stocks reverse months of decline, with the three major US indices still mired in bear markets.

Dow Components Procter & Gamble Co gained 0.93% and Travelers Companies Inc (TRV.N) rose 4.44% after companies posted better-than-expected quarterly profit.

According to Refinitiv data, third-quarter earnings growth expectations for S&P 500 companies rose slightly to 3% from 2.8% on Tuesday, still well below the 11.1% rise expected in early July.

Tesla Inc. (TSLA.O) advanced 0.84% ​​on earnings after the bell, focusing on any weak demand that is beginning to weigh on the auto industry. Shares fell 3.94% after the close as the electric vehicle maker missed third-quarter revenue estimates.

Volume on U.S. exchanges was 11.05 billion shares, compared to an average of 11.62 billion for the full session over the past 20 trading days.

Falling issues outnumbered rising ones on the NYSE by a ratio of 3.28 to 1; on the Nasdaq, a ratio of 2.69 to 1 favored the decliners.

The S&P 500 posted 2 new 52-week highs and 9 new lows; the Nasdaq Composite recorded 42 new highs and 232 new lows.

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Reporting by Chuck Mikolajczak in New York Editing by Matthew Lewis

Our standards: The Thomson Reuters Trust Principles.

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