Chipotle and AMD drag on the S&P 500
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The Dow fell triple digits and other indexes pulled back after a string of disappointing earnings, including results from Chipotle Mexican Grill Inc. and Applied Micro Devices Inc.
A recent series of record closes, low volatility and stretched valuations have also been cited for the cautious trading that is dominating the session.
What are the main benchmarks doing?
The S&P 500 dropped 19 points, or 0.8%, to 2,549, with all of its 11 main sectors trading lower. Telecoms and industrials led the decline. The Dow Jones Industrial Average dropped 160 points, or 0.7%, to 23,280, a day after closing at a record.
The Nasdaq Composite shed 53 points, or 0.8%, to 6,544.
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What's driving markets?
Even though overall earnings have been beating expectations, a few results on Wednesday disappointed investors.
Burrito chain Chipotle(CMG) and chip maker AMD(AMD) were the S&P 500's two biggest losers, with stocks falling 14% and 11%, respectively, following disappointing earnings.
Chipotle posted weaker-than-expected earnings (http://www.marketwatch.com/story/chipotle-stock-drops-after-hours-on-third-quarter-earnings-miss-2017-10-24) late Tuesday, sinking 15%, while AMD's results beat expectations (http://www.marketwatch.com/story/amd-shares-decline-even-after-earnings-beat-2017-10-24), but investors seemed more concerned about the company's outlook (http://www.marketwatch.com/story/amd-stock-still-volatile-despite-fresh-stability-in-chip-makers-business-2017-10-24), which may not have been as strong as hoped. AMD shares are tumbling 13%.
What are analysts saying?
"It is clear that markets are reacting to some disappointing earnings, because the economic picture remains robust," said Randy Frederick, managing director of trading and derivatives at Schwab Center for Financial Research.
"Markets have outperformed over the past several weeks and have been overbought. We would not be surprised to see a mild pullback as people take profits," Frederick said.
Most analysts believe momentum remains strong, however.
"While we continue to advise patience and some caution in the near term [due to low volatility and stretched valuation] the strength in U.S. stocks continues to support our view that we are nowhere near the end of this secular bull market," said Andrew Adams, market strategist at Raymond James, in a note.
What are other assets doing?
The dollar (http://www.marketwatch.com/story/dollar-largely-gains-with-aussie-whacked-by-soft-inflation-figure-2017-10-25) was little changed after giving up an earlier gain that analysts had pinned on bets that the Federal Reserve's next boss either will pick up the pace with interest-rate hikes or stay the course. Meanwhile, the yield on the 10-year Treasury note is trading around 2.43%.
European stocks (http://www.marketwatch.com/story/gucci-parent-helps-lift-luxury-stocks-but-european-markets-stay-in-their-rut-2017-10-25) mostly rose, while Asian markets largely closed higher, though Japan's Nikkei benchmark halted a 16-session winning streak (http://www.marketwatch.com/story/nikkeis-16-session-winning-streak-is-in-peril-as-japan-stocks-pause-at-multiyear-heights-2017-10-24). Gold prices ticked higher and oil futures (http://www.marketwatch.com/story/oil-prices-ease-as-investors-wait-to-see-if-crude-stockpiles-decline-2017-10-25) lost ground.
Read:How oil is escaping from 'purgatory' as supply glut turns to supply concern (http://www.marketwatch.com/story/how-oil-is-escaping-from-purgatory-as-supply-glut-turns-to-supply-concern-2017-10-25)
How is the economy?
Durable-goods orders (http://www.marketwatch.com/story/business-investment-surges-again-in-september-durable-goods-report-shows-2017-10-25)rose 2.2% in September, beating the MarketWatch forecast of a 0.7% gain. Excluding transportation orders increased 0.7%.
New-home sales ran at a 667,000 annual pace (http://www.marketwatch.com/story/new-home-sales-roar-to-a-10-year-high-in-september-2017-10-25) in September, an 18.9% increase compared with August, and a 17% increase compared with a year ago. The data crushed the MarketWatch consensus forecast of a 555,000 annual rate.
"Today's economic data were all good and suggest continued growth. Even if we have a pullback, its likely to be shallow and short-lived," Frederick said.
Check out:MarketWatch's Economic Calendar (http://www.marketwatch.com/economy-politics/calendars/economic)
No Fed officials are scheduled to speak, but investors are bracing for President Donald Trump's pick to lead the U.S. central bank. Trump on Tuesday asked Senate Republicans who should be the next Fed boss, and Stanford University economist John Taylor reportedly beat out Fed Gov. Jerome Powell (http://www.marketwatch.com/story/trump-asked-senate-republicans-who-should-be-next-fed-chair-and-john-taylor-reportedly-was-the-winner-2017-10-24). The president is expected to announce his choice before starting a trip to Asia (http://www.marketwatch.com/story/trump-today-president-says-hes-very-very-close-to-naming-pick-for-fed-chief-2017-10-23) on Nov. 3.
Read:Trump indicates Taylor and Powell could be named together to top Fed roles (http://www.marketwatch.com/story/trump-indicates-taylor-and-powell-could-be-named-together-to-top-fed-roles-2017-10-20)
And see:Who's the next Fed boss? Brace for a 'Trumpian surprise' (http://www.marketwatch.com/story/whos-the-next-fed-boss-brace-for-a-trumpian-surprise-2017-10-20)
Which stocks are big movers?
Shares of Lumber Liquidators (LL) fell 1.7% after the company announced it reached an agreement with a group of plaintiffs to settle lawsuits associated with Chinese-made laminate flooring it had previously sold (http://www.marketwatch.com/story/lumber-liquidators-reaches-36-mln-deal-on-chinese-laminate-products-2017-10-24). As part of the deal, Lumber Liquidators will pay $22 million in cash and provide $14 million in store credit to the plaintiffs.
On the upside, Akamai Technologies Inc.(AKAM) rose 5.2% after the provider of tech services posted better-than-anticipated results late Tuesday.
Shares in Visa Inc.(V) rose 1% following its stronger-than-expected results (http://www.marketwatch.com/story/visas-stock-jumps-after-profit-and-sales-rise-above-expectations-2017-10-25).
(http://www.marketwatch.com/story/visas-stock-jumps-after-profit-and-sales-rise-above-expectations-2017-10-25)Aerospace giant Northrop Grumman Corp.(NOC) rose 2.2% after its earnings beat forecasts.
Tesla Inc.(TSLA) fell 3.4% following revelation that David Einhorn's Greenlight Capital criticized the Silicon Valley car maker's ability in manufacturing driverless cars (http://www.marketwatch.com/story/tesla-slammed-by-einhorns-greenlight-capital-2017-10-24) and suggested that they are just putting "dangerous products on the road."
--Victor Reklaitis contributed to this report.
(END) Dow Jones Newswires
October 25, 2017 17:16 ET (21:16 GMT)