4.10pm: US markets lose gains to close lower
US markets retreated in afternoon trading to end the day in negative territory as comments from a US Federal Reserve official brought worries about the future path of interest rates back to the forefront of investors minds and overshadowed a flurry of solid earnings.
At the close the Dow Jones Industrial Average was down 91 points at 30,333, the S&P 500 slipped 30 points to 3,666 and the Nasdaq Composite fell 66 points to 10,615.
Stocks had earlier opened higher, boosted by gains in names such as IBM after the IT services company beat quarterly earnings estimates on Wednesday and said it expects to exceed full-year revenue growth targets.
AT&T Inc also rose after raising annual guidance but on the downside Tesla shares dropped more than 6% after the electric vehicle maker said Wednesday evening it expects to miss its 2022 deliveries target.
But as the session wore on, equities lost their gains, as strong weekly jobless claims and comments from Federal Reserve Bank of Philadelphia President Patrick Harker bolstered concerns about the Fed hiking rates and potentially tilting the economy into a recession.
Harker said the Fed is not done raising its short-term rate target as high inflation persists.
12.05pm: Equity rally back on
US indices rose into green territory midday, as traders eyed a number of strong third quarter earnings results.
At midday, the S&P 500 was up by 0.5% at 3,712, while the Nasdaq Composite was up by 1% at 10,789 and the Dow Jones rose by 0.7% to 30,647 points.
Chris Beauchamp, chief market analyst at online trading platform IG, said stocks have taken heart from better earnings and moved higher.
“Equities have staged a recovery after a lacklustre morning session, helped along by fresh good news in the shape of earnings from AT&T and American Airlines,” Beauchamp wrote in a report.
He noted that hints that the US Federal Reserve might be closer to the end of its interest rate hikes have added to the more positive attitude.
“It looks like investors remain content to pay attention to good news and put less weight on bad for the time being, and with sentiment still in the doldrums it seems fairly easy to create the groundwork for more short-term gains. Having swung so far in one direction, the pendulum is swinging back in favour of risk assets, at least until the next Fed meeting,” Beauchamp wrote.
The major movers at midday included semiconductor equipment maker Lam Research, up over 10% on strong 3Q earnings results, along with American Airlines, which beat top and bottom line estimates for 3Q, was up by 9.2%, and Datadog was up by 8.5%.
On the downside, insurance company Allstate slid by 11.8%, on a 3Q earnings miss due to inflation, while Alaska Air fell by 5.4%, and Tesla continued its downward trend, as the EV company reported record 3Q revenue but cut its vehicle delivery target yesterday.
9.35am: Investors weigh up earnings, economic data
US stocks opened mixed as corporate earnings continue to roll in amid recession concerns.
Just after the market opened, the Dow Jones Industrial Average had added 38 points or 0.1% at 30,462 points, while the S&P 500 had slipped 7 points or 0.2% at 3,668 points and the Nasdaq Composite was down 31 points or 0.3% at 10,648 points.
On the data front, the Philadelphia Fed Manufacturing Index edged up in October to -8.7 from -9.9, below the market expectation of -5.5.
Pantheon Macroeconomics chief economist Ian Shepherdson said the small rise in the Philly Fed headline was disappointing but not definitive.
“No single regional survey is definitive evidence of anything; the samples are small—only about 100 firms—and local, so are only loosely reflective of national manufacturing activity, at best,” he noted. “We will reserve judgment on the health of US manufacturing in October until the other regional surveys are released.”
“Either way, the key question for manufacturing in the months ahead is the extent to which business equipment investment rebounds in the wake of the decline in oil prices," he continued.
Meanwhile, weekly initial jobless claims for the week ended October 15 fell to 214,000 from 228,000, coming in well below the expected 230,000.
“The drop in initial jobless claims supports our view that the increases in the past two weeks were noise rather than signal, triggered by seasonal adjustment problems,” Shepherdson commented.
“But one week’s data proves nothing, and we need to see similar readings over the next few weeks in order to be sure the trend is still below 220,000.”
6.30am: Renewed gloom?
US stocks are expected to open lower on Thursday as US Treasury yields rise amid expectations of further interest rate hikes in the world’s biggest economy.
Futures for the Dow Jones Industrial Average were flat in pre-market trading, while those for the S&P 500 were 0.3% lower, and contracts for the Nasdaq-100 shed 0.6%.
The tone of comments from US rate-setters continues to be hawkish, reflecting concerns over price pressures which in turn weighs on stocks.
Ipek Ozkardeskaya, senior analyst at Swissquote Bank noted comments from Minneapolis Fed President Neel Kashkari on Thursday that the Federal Reserve could push interest rates beyond 4.75% if inflation doesn’t stop rising.
The Federal Reserve’s key policy rate currently stands at 3.0%-3.25% after rate-setters raised interest rates with three 75 basis points hike this year. Another 75 basis point increase is expected in November. Headline inflation, meanwhile, remains around 40-year highs and food price inflation continues to rise. Investors fear that the combination of higher interest rates and elevated inflation will push the economy into a deep recession.
Against this worrying backdrop, the yield on 10-year US Treasuries rose to 4.127% from just below 4.00%.
The latest trickle of earnings news has come in mixed and hasn’t improved overall sentiment, said Ozkardeskaya, citing, among others, Procter & Gamble’s caution that sales for the fiscal year 2023 could fall between by 1% to 3%, while Tesla results were mixed.
“Tesla announced better-than-expected earnings per share, but slightly missed on revenue expectations. The company said that the rising raw material prices and inefficiencies in the Berlin factory, combined with the strong US dollar weighed on results. And, Tesla missing revenue expectations is not good for the stock price, as any misstep has the power of sending the share price aggressively lower," she noted.
Next up, Philip Morris and Dow Inc are due to announce earnings today, while American Express reports on Friday.
Contact the author at jon.hopkins@proactiveinvestors.c