Wall Street Caps Third-Straight Session of Losses

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FOX Business: The Power to Prosper

U.S. equity markets turned a two-day selloff into three after quarterly earnings reports continued to disappoint investors.

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The Dow Jones Industrial Average was 119 points lower, or 0.67% to 17731. The S&P 500 fell 11 points, or 0.57% to 2102, while the Nasdaq Composite declined 25 points, or 0.49% to 5146.

All 10 S&P 500 sectors closed in negative territory with the materials and utilities sectors leading the trend lower.

Today’s Markets

Equity markets struggled for direction after a tech-fueled selloff on Wednesday led by juggernauts Apple (NASDAQ:AAPL) and Microsoft (NASDAQ:MSFT), despite strong economic data and mixed earnings results from several Dow components including 3M (NYSE:MMM), Caterpillar (NYSE:CAT), and McDonald’s (NYSE:MCD).

Phil Orlando, chief equity strategist and senior portfolio manager at Federated Investors, said it’s another good news is bad news day for Wall Street.

“You have two trends moving in different directions: First is on the earnings front. Caterpillar was somewhat disappointing with some underlying fundamental trends and some currency issues. That’s on the negative side. But on the positive side of the leger, macroeconomic stuff has just been phenomenal,” he said.

In the second quarter, Caterpillar booked adjusted quarterly profits per share of $1.27, which were in-line with Wall Street estimates. Revenue, meanwhile, came in at $12.32 billion, below expectations for $12.62 billion. The results sent shares nearly 3% lower in pre-market action. Caterpillar said the decline in its sales figures was due primarily to lower consumer demand in several regions and currency headwinds.

3M’s 2Q results matched expectations. The company reported an adjusted EPS of $2.02 on revenue of $7.69 billion. It also lowered the top end of its full-year outlook. It now sees earnings in the range of $7.80 to $8.00 a share, compared to $7.80 to $8.10 a share previously. It also warned currency headwinds will likely cut into sales by 6% to 7%.

The world’s biggest burger chain beat the Street in the second quarter, revealing adjusted earnings per share of $1.26 on revenue of $6.49 billion. Wall Street was looking for profits of $1.23 a share on sales of $6.45 billion. However, despite the headline beat, McDonald’s said its global same-store sales saw a 0.7% decrease during the reporting period thanks to declining customer traffic in all major markets. As the company continues its turnaround effort, CEO Steve Easterbook said in a statement that in the third quarter, the company continues to focus on strategic improvements, focusing on “the basic fundamentals of running great restaurants.”

Comcast (NYSE:CMCSA), General Motors (NYSE:GM), Eli Lilly (NYSE:LLY), and Dunkin Brands (NYSE:DNKN) were also among the companies reporting quarterly report cards before the market open.

Elsewhere in corporate news, Apple (NASDAQ:APPL) in a move to help quell investor unease, said it plans to reduce annual spending on manufacturing equipment, data centers, and retail stores by $1 billion, or about 8%, without making changes to its planned product lines.

Pearson said it will sell the FT Group, owner of the salmon-colored ‘Financial Times’ publication, to Asia’s largest independent business media group, Nikkei, for about $1.32 billion. Pearson said it will continue to spend more time and focus on its education business after the sale closes.

Bank of America (NYSE:BAC) said its chief financial officer will part ways with the company amid a management shakeup. Bruce Thompson will be replaced by Paul Donofrio, CFO of the bank’s consumer banking and wealth management units. Thompson has served as CFO since 2010.

The economic calendar in the U.S. was light with weekly jobless claims that rose to a level not seen since 1973. The Labor Department reported the number of Americans filing for first-time unemployment benefits dropped significantly more than expected last week to 255,000 from an unrevised 281,000 the week prior. Wall Street had expected claims to fall to 281,000.

Orlando said despite the good weekly claims number combined with a solid reading on leading indicators, which showed a 0.6% increase compared to the 0.3% expected tick higher, better-than-expected data still sends jitters down investors’ spines.

“What this does is solidifies the Fed’s case to liftoff in September,” he said. “Our forecast is for the first hike in September and four quarter-point rate hikes at the four pressers after that: So, September, December, March and June.”

Meanwhile, commodities saw relief after experiencing steep declines in the previous session due to heightened concerns over when the Fed will likely begin raising interest rates, and as worries over Greece’s future in the eurozone subsided.

U.S. crude oil futures settled down 1.32% to $48.54 a barrel, while Brent crude, the international benchmark, traded 1.5% lower to $55.26 per barrel. Gold, which saw a plunge on Wednesday, bounced between gains and losses, recently traded 0.27% lower to $1,088 a troy ounce.

In currencies, the euro rose 0.67% against the U.S. dollar. The yield on the benchmark 10-year U.S. Treasury note rose 0.049 of a percentage point to 2.273%. Bond yields move in the opposite direction of prices.

“Commodities are generally trading on two things: The strong dollar…and concern about a Chinese hard landing,” Orlando noted. “China has been a voracious consumer of gold and oil so the thinking there is if there’s China weakness, maybe a recession, there will be less incremental demand for gold and crude, so commodities should sell.”

He added a third motivator is driving NYMEX crude to trade below the $50 a barrel mark: The possibility of an Iran nuclear deal.

“Iranians said they can get organic production up to half a million barrels per day within six months and up to one million barrels per day between six to 12 monhts. Looking at reduced demand in China at a time Iran will flood the market means crude prices may continue to drift lower and recast double down bottom in the $43 a barrel neighborhood.”

Elsewhere in the world, overnight Greece’s parliament approved a second round of austerity measures aimed at starting negotiations with the nation’s eurozone creditors for an 86 billion euro bailout package.

The move didn’t spur much activity in Europe, though, where markets ended the session mostly flat. The Euro Stoxx 50, which tracks large-cap companies in the eurozone fell 0.06%. Meanwhile, the German Dax fell 0.13%, the French CAC 40 was 0.05% higher, while the UK’s FTSE 100 fell 0.20%.

Asia markets, meanwhile, also saw positive gains during the session. China’s Shanghai Composite index jumped 2.43%. Hong Kong’s Hang Seng rose 0.46%. Japan’s Nikkei added 0.44%.