MARKET SNAPSHOT: Stock Market Pulls Back After Disappointing Earnings

By Victor Reklaitis and Anora M. Gaudiano, MarketWatch Features Dow Jones Newswires

Dow industrials holds near record close

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U.S. stocks came under pressure on Wednesday after a string of disappointing earnings, including results from Chipotle Mexican Grill Inc. and Applied Micro Devices Inc.

A recent string of record closes, low volatility and stretched valuations have been cited as the reason behind cautious trading.

What are the main benchmarks doing?

The S&P 500 was off by 20 points, or 0.8%, to 2,549, with all of its 11 main sectors trading lower. Telecoms and utilities led the decline, down 2.1% and 1%, respectively, but industrials and financials were also hard hit, down 0.9%.

The Nasdaq Composite declined 70 points, or 1%, to 6,527.

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Meanwhile the Dow Jones Industrial Average dropped 120 points, or 0.5%, to 23,320, a day after closing at a record.

What's driving markets?

Even though overall earnings have been beating expectations, some of 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, 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.

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 rose to 2.45%, its highest level since March.

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 futures 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 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?

On the upside, Akamai Technologies Inc.(AKAM) rose 8.6% after the provider of tech services posted better-than-anticipated results late Tuesday.

Shares in Visa Inc.(V) rose 1.5% following its stronger-than-expected results (http://www.marketwatch.com/story/visas-stock-jumps-after-profit-and-sales-rise-above-expectations-2017-10-25), while drugstore operator Walgreens Boots Alliance Inc. (WBA) and aerospace giant Northrop Grumman Corp.(NOC) both gained about 4% after their earnings beat forecasts.

(END) Dow Jones Newswires

October 25, 2017 11:30 ET (15:30 GMT)