Wall Street ends lower as Fed worries outweigh earnings

US stocks ended lower on Thursday as jobs data and comments from a Federal Reserve official reinforced expectations that the central bank will aggressively hike interest rates, outweighing a wave of solid corporate earnings.

Shares initially rose early in the session, buoyed by gains from names like IBM, which rose 4.73% after the IT services company beat quarterly earnings estimates on Wednesday and said it would beat full-year revenue growth targets. AT&T Inc rose 7.72% after raising its annual earnings forecast.

However, stocks failed to hold onto gains as strong weekly jobless claims and comments from Federal Reserve Bank of Philadelphia President Patrick Harker heightened concerns about Fed rate hikes and the potential for the economy to plunge into recession.

Harker said the Fed is not finished raising its near-term interest rate target as high inflation persists, helping push the US 10-year Treasury yield to its highest since June 2008 at 4.239%.

“It’s interest rates that are driving equity volatility, that’s how we’ve seen things throughout the year, it’s kind of a harbinger that things are settling down in the equity space and you’re feeling better about adding risk as the volatility decreases interest rates,” said Zachary Hill, head of portfolio management at Horizon Investments in Charlotte, North Carolina.

“I’m not sure we’re going to see that pause that some Fed members have been pointing out, and certainly some market participants have kind of clung to it.”

The Dow Jones Industrial Average fell 90.22 points, or 0.3%, to 30,333.59, the S&P 500 lost 29.38 points, or 0.80%, to 3,665.78, and the Nasdaq Composite fell 65.66 points, or 0 .61% to 10,614.84.

Better-than-expected results so far have pushed third-quarter earnings growth expectations for S&P 500 companies up to 3.1% from a 2.8% rise earlier in the week, but still well below the 11.1% increase, which was forecast in early July .

Tesla Inc slumped 6.65% as the electric vehicle maker flagged ongoing logistical challenges, with fourth-quarter deliveries growing less than a 50% target.

Equities have been under pressure this year as concerns mounted over the impact of the Fed’s aggressive rate hikes on corporate earnings and the broader economy as the central bank sought to quell stubbornly high inflation.

Other data showed that existing home sales fell for eight straight months, while another measurement showed that factory activity in the Federal Reserve Bank of Philadelphia district fell again in October.

The US Federal Reserve is widely expected to announce a fourth consecutive 75 basis point hike at its November meeting, with an external chance of a full percentage point hike.

Volume on US exchanges was 11.37 billion shares compared to the average of 11.62 billion for the entire session over the last 20 trading days.

Declining issuance predominated on the NYSE at a 2.12 to 1 ratio; on the Nasdaq, a 1.34-to-1 ratio favored relegators.

The S&P 500 posted 3 new 52-week highs and 28 new lows; the Nasdaq Composite posted 53 new highs and 239 new lows.

https://economictimes.indiatimes.com/markets/stocks/news/wall-street-ends-lower-as-fed-worries-outweigh-earnings/articleshow/94999116.cms Wall Street ends lower as Fed worries outweigh earnings

Russell Falcon

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