S&P, Nasdaq pulled lower as tech earnings misses fuel slowdown fears

WALL Street wavered on Wednesday, snapping a three-day rally as dour earnings guidance added to mounting fears of a global economic slowdown.

But those fears, along with a smaller-than-expected interest rate hike from the Bank of Canada, continued to feed hopes that the Fed might consider easing the size of its rate hikes after its Nov 1-2 policy meeting.

The Dow Jones Industrial Average closed flat at 31,839.11 (up 2.37 points), the S&P 500 lost 28.51 points or 0.74% to 3,830.60 while the Nasdaq Composite dropped 228.12 points or 2.03% to 10,970.99.

“Central banks are starting to blink,” said Paul Kim, Chief Executive Officer at Simplify ETFs in New York. “It’s part of the larger trend and supports the (Fed) ‘pivot’ narrative.”

The S&P 500 and the Nasdaq were last in negative territory, dragged lower by market-leading tech and tech-adjacent companies following results from Microsoft and Alphabet.

Those gloomy reports brought worries over an impending global economic downturn from simmer to boil, and spread to other high profile megacaps.

Sales of newly constructed US homes plunged in September while mortgage rates hit their highest level in more than two decades, adding to the growing pile of data suggesting a softening economic landscape.

Among the 11 major sectors of the S&P 500, communications services and tech were suffering the largest percentage losses.

Third quarter earnings season has shifted into high gear with 170 of the companies in the S&P 500 having reported. Of those, 75% have delivered consensus-beating results, according to Refinitiv.

But they have a low bar to clear. Analysts now see aggregate S&P 500 earnings growth of 2.3%, down from 4.5% at the beginning of the month as per Refinitiv.

Among the initial takeaways so far this earnings season, Kim said “two themes are emerging: labour costs and US dollar strength”.

“US dollar strength is a headwind for larger companies with international revenues,” Kim added.

Boeing Co reported a deeper than expected third quarter loss, sending its shares sliding 7.9%. On the plus side, Visa Inc rose 4.7% in the wake of the consumer credit company’s profit beat.

Advancing issues outnumbered declining ones on the NYSE by a 2.97-to-1 ratio; on Nasdaq, a 2.20-to-1 ratio favoured advancers.

The S&P 500 posted 25 new 52-week highs and two new lows; the Nasdaq Composite recorded 87 new highs and 54 new lows. – Oct 27, 2022

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