US stocks close lower as rise in yields overshadows earnings

U.S. stocks posted a two-day winning streak on Wednesday, as weakness in Abbott Laboratories shares and a rise in Treasury yields sapped momentum for the current earnings season, outweighing a rise in Netflix Inc shares.

The yield on the 10-year US Treasury bond hit its highest level in more than 14 years as weak housing data did little to change expectations that the Federal Reserve will aggressively raise interest rates as it tries to stem stubbornly high inflation fight.

The rise in yields weighed on rate-sensitive names like real estate stocks, which fell 2.56% on the day as S&P’s worst-performing sector, and megacap growth stocks like Microsoft Corp and Amazon.com Inc. Energy was the only S&P sector who were affected by this ended the session in positive territory with a gain of 2.94%.

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

However, Netflix stock, the top performer of the P 500, rose 13.1% after adding 2.4 million new subscribers globally in the third quarter, more than double the consensus forecast, and expecting 4.5 million new subscribers by the end of the year.

“The bonds are just so heavy on it… it’s a shame to see good profits being squandered,” said JJ Kinahan, CEO of IG North America in Chicago.

“Ultimately earnings drive stocks but when overshadowed it’s difficult to have that optimism but ultimately good earnings will drive stocks higher it’s a question of how much the macro picture continues to weigh on those gains becomes.”

The Dow Jones Industrial Average fell 99.99 points, or 0.33%, to 30,423.81, the S&P 500 lost 24.82 points, or 0.67%, to 3,695.16, and the Nasdaq Composite fell 91.89 points, or 0 .85% to 10,680.51.

Fed officials have been largely in sync in their public comments on the need to raise rates aggressively to fight inflation. On Wednesday, Federal Reserve Bank of Minneapolis President Neel Kashkari said labor market demand remains strong and underlying inflationary pressures are unlikely to have peaked yet.

The Fed’s Beige Book survey of economic activity showed companies noting that price pressures remained high, although there was some easing in several counties, while the labor market showed some signs of cooling.

The US Federal Reserve is widely expected to hike interest rates by 75 basis points for the fourth straight month at its November meeting.

The Fed’s influence on the housing market continues to increase. Housing starts, a measure of new housing construction, fell 8.1% in September, the latest sign the economy is losing steam.

The PHLX Housing Index fell -4.50%, marking another sector unlikely to help stocks reverse months of declines as the top three US indices remain mired in bear markets.

Dow components

& Gamble Co rose 0.93% and Travelers Companies Inc rose 4.44% after the companies posted better-than-expected quarterly earnings.

Third-quarter earnings growth expectations for S&P 500 companies rose to 3% from 2.8% on Tuesday, according to Refinitiv data, still well below the 11.1% increase forecast in early July.

Tesla Inc rose 0.84% ​​from its earnings after the bell, with a focus on any weakness in 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 sales estimates.

Volume on US exchanges was 11.05 billion shares compared to the average of 11.62 billion for the entire session over the past 20 trading days.

Declining issues predominated on the NYSE at a 3.28 to 1 ratio; on the Nasdaq, a 2.69 to 1 ratio favored decliners.

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

https://economictimes.indiatimes.com/markets/stocks/news/equities-close-lower-as-rise-in-yields-overshadows-earnings/articleshow/94975422.cms US stocks close lower as rise in yields overshadows earnings

Russell Falcon

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