U.S. Stocks Tick Higher as Investors Weigh Earnings

By Riva Gold and Amrith Ramkumar Features Dow Jones Newswires

Global stocks inch lower

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-- Bank shares under pressure

-- Snap shares fall after earnings

The S&P 500 inched lower for the second straight day Wednesday, as investors parsed the latest batch of corporate earnings.

The index declined 0.1% after snapping a five-session winning streak Tuesday. The Dow Jones Industrial Average fell 23 points, or 0.1%, to 23534, and the Nasdaq Composite swung between small gains and losses and was recently up less than 0.1%.

Earnings growth has helped propel major indexes to fresh all-time highs this year, but some investors and analysts have said future gains could be limited because of high expectations for continued profit growth.

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"There's no question that expectations are elevated at this point," said Jeremy Bryan, a portfolio manager at Gradient Investments. "If companies start to miss or start to bring numbers down, that could definitely be a catalyst" for a sharp pullback in stocks, he said.

Still, Mr. Bryan said he is optimistic about equities moving forward because earnings growth has been strong so far. More than 85% of S&P 500 companies have reported third-quarter results as of Wednesday, with roughly three-quarters of them beating earnings expectations, compared with the five-year average of 69%, according to FactSet.

The largest company in the S&P 500 hit another milestone Wednesday after reporting its best quarterly growth in two years last week. Apple shares rose to a new all-time high, making the iPhone maker the first public U.S. company to ever reach a market value of $900 billion.

Shares of Snap, which isn't in the S&P 500, fell 15% after its quarterly results fell short of expectations. Shares were down as much as 20% in after-hours trading Tuesday, but pared declines after the company disclosed that Chinese tech giant Tencent Holdings bought a 12% stake.

Another high-profile technology firm that went public this year, Roku, is scheduled to report earnings for the first time as a public company after the market closes Wednesday.

Humana shares shed 6.1% after the health insurer said profit fell in its latest quarter, as the firm trimmed its workforce and earnings from its health-care-services business dropped.

Time Warner was also among the biggest decliners in the S&P 500. Shares fell 2.9% after a top AT&T executive warned for the first time that the company is unsure about the timing of its planned takeover of Time Warner.

Bank shares continued to lag behind Wednesday, hit by a shrinking gap between short and long-dated bond yields. The U.S. yield curve, or the gap between two and 10-year Treasury yields, is at its flattest since 2007, according to strategists at Deutsche Bank. The S&P 500 financial sector fell 0.7%.

Lower long-term government bond yields and a flatter yield curve tend to hurt lenders' profits, since banks earn money on the difference between what they pay on deposits and what they charge to lend money.

Long-dated bond yields have come under modest pressure in recent sessions amid concerns that disagreements could force the GOP to make changes to its tax bill and slow down plans to pass it by the year's end.

A year after the U.S. presidential election, investors have realized that anything related to tax reform will take longer and look different than what was initially discussed, said Jonathan Mackay, investment strategist at Schroders.

"We do see a high probability for a tax cut, but it will probably be different from what we've seen from the Republican plan so far," he said.

The yield on the 10-year U.S. Treasury note inched up to 2.314% Wednesday, according to Tradeweb, from 2.309%. Yields rise as bond prices fall.

The Stoxx Europe 600 declined less than 0.1%.

Earlier Wednesday, Japan's Nikkei Stock Average edged down 0.1% from a near 26-year high. Hong Kong's Hang Seng Index shed 0.3%, but shares of China Literature nearly doubled on their first day of trading amid the global frenzy for technology stocks.

Write to Riva Gold at riva.gold@wsj.com and Amrith Ramkumar at amrith.ramkumar@wsj.com

-- S&P 500 on track for all-time high

-- Bank shares under pressure

-- Snap shares fall after earnings

The S&P 500 headed toward another all-time high Wednesday, as investors parsed the latest batch of corporate earnings.

Broad-based profit growth has helped propel major indexes to fresh records. Many investors say solid corporate earnings and a U.S. economy that is picking up steam should continue supporting major indexes moving forward.

"The fundamental backdrop is pretty good," said Mark Heppenstall, chief investment officer at Penn Mutual Asset Management. "Investors are looking beyond any of the potential bumps in the road at this point," he said.

The S&P 500 rose 0.1% after snapping a five-session winning streak Tuesday. The Dow Jones Industrial Average advanced 4 points, or less than 0.1%, to 23561, and the Nasdaq Composite was recently up 0.3%, after swinging between small gains and losses earlier in the session.

More than 85% of S&P 500 companies have reported third-quarter results as of Wednesday morning, with roughly three-quarters of them beating earnings expectations, according to FactSet. Per-share earnings at the firms have grown about 6.4% in the third quarter from the year-earlier period.

"That's a deceleration from what we've had, but for 2018, I don't think people are backing off what we project," said Jeremy Bryan, a portfolio manager at Gradient Investments.

Apple hit another milestone Wednesday, becoming the first public U.S. company to ever reach a market value of $900 billion. The largest company in the S&P 500 reported its best quarterly growth in two years last week. Shares rose 0.7% to an all-time high Wednesday.

Shares of Snap fell 18% after its quarterly results fell short of expectations. Its quarterly loss more than tripled, as quarter-over-quarter growth in daily active users of social-media app Snapchat was its slowest since the company started reporting the metric. Snap disclosed Wednesday that Chinese tech giant Tencent Holdings bought a 12% stake.

Roku, another high-profile technology firm that went public this year, is scheduled to report earnings for the first time as a public company after the market closes Wednesday.

Humana shares shed 5.3% after the health insurer said profit fell in its latest quarter, as the firm trimmed its workforce and earnings from its health-care-services business dropped.

Time Warner was also among the biggest decliners in the S&P 500. Shares fell 6% after a top AT&T executive warned for the first time that the company is unsure about the timing of its planned takeover of Time Warner.

Bank shares continued to lag behind Wednesday, hit by a shrinking gap between short and long-dated bond yields. The S&P 500 financial sector fell 0.6%. Banks earn money on the difference between what they pay on deposits and what they charge to lend money.

Lower long-term government bond yields and a flatter yield curve tend to hurt lenders' profits, since banks earn money on the difference between what they pay on deposits and what they charge to lend money.

Long-dated bond yields have come under modest pressure in recent sessions amid concerns that disagreements could force the GOP to make changes to its tax bill and slow down plans to pass it by the year's end.

The yield on the 10-year U.S. Treasury note rose to 2.329% Wednesday, according to Tradeweb, from 2.309%. Yields rise as bond prices fall.

The Stoxx Europe 600 declined less than 0.1%.

Earlier Wednesday, Japan's Nikkei Stock Average edged down 0.1% from a near 26-year high. Hong Kong's Hang Seng Index shed 0.3%, but shares of China Literature nearly doubled on their first day of trading amid the global frenzy for technology stocks.

Write to Riva Gold at riva.gold@wsj.com and Amrith Ramkumar at amrith.ramkumar@wsj.com

(END) Dow Jones Newswires

November 08, 2017 15:56 ET (20:56 GMT)