MARKET SNAPSHOT: Dow Down By Triple Digits As Stocks Sag On A String Of Disappointing Earnings
Chipotle and AMD drag on the S&P 500
The stock market pared some of its losses Wednesday as investors sought a comfortable level to buy back into equities, though the Dow was still down by triple digits on a string of disappointing earnings reports.
A recent series of record closes, low volatility and stretched valuations were also cited as reasons for the cautious trading that is dominating much of the session.
What are the main benchmarks doing?
The S&P 500 dropped 12 points, or 0.5%, to 2,556, with all 11 main sectors trading lower. Telecoms and industrials led the decline. The Dow Jones Industrial Average fell 112 points, or 0.5%, to 23,328, a day after closing at a record.
The Nasdaq Composite shed 38 points, or 0.6%, to 6,560.
What's driving markets?
Even though overall earnings have beaten 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. 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 12%.
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.
Frederick credited some of the intraday rebound to investors who view pullbacks as buying opportunities. "With strong fundamentals, and a very strong economic backdrop, I suspect this pattern will continue to repeat itself," he said.
Most analysts believe the market's momentum remains strong.
"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 of interest-rate hikes or stay the course. Meanwhile, the yield on the 10-year Treasury note rose to 2.44% as bond prices fell.
Vincent Deluard, vice president of global macro strategy at INTL FCStone, predicted that more funds will shift to stocks from bonds as yields continue to rise. He shared the following chart in his report.
"It is theoretically possible that an accelerating economy, coupled with a more hawkish Fed and a progressive tightening of global central banks' liquidity faucets, could convince investors to rotate from bonds into equities," Deluard wrote.
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 settled little changed from the previous settlement and oil futures (http://www.marketwatch.com/story/oil-prices-ease-as-investors-wait-to-see-if-crude-stockpiles-decline-2017-10-25) declined.
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)
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) reversed from an early fall to rise 0.4% 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 5.1% after the provider of tech services posted better-than-anticipated results late Tuesday.
Shares in Visa Inc.(V) rose 1.4% 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 3.1% 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 article.
(END) Dow Jones Newswires
October 25, 2017 17:16 ET (21:16 GMT)