Dow, S&P end down as Treasury yields rise, investors eye earnings
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The Dow Jones Industrial Average fell 338.80 points, or 0.78 per cent, to 42,932.84.
PHOTO: AFP
NEW YORK - The Dow Jones Industrial Average and S&P 500 closed lower on Oct 21, retreating from Oct 18’s record high closes and six straight weekly gains as Treasury yields rose and investors wary of high valuations awaited earnings from major companies.
“It’s not at all unusual for the market to want to take a little bit of a breather after six weeks of continually record highs,” said Carol Schleif, chief investment officer at BMO Family Office.
According to preliminary data, the S&P 500 lost 9.89 points, or 0.17 per cent, to end at 5,854.78 points, while the Nasdaq Composite gained 50.45 points, or 0.27 per cent, to 18,539.37. The Dow Jones Industrial Average fell 338.80 points, or 0.78 per cent, to 42,932.84.
The yield on the benchmark 10-year Treasury jumped as high as 4.17 per cent, a 12-week high.
“The rise in the 10-year yield is causing confusion that maybe the economy is growing too rapidly and that employment remains too resilient,” said Sam Stovall, chief investment strategist at CFRA Research. “As a result, the Fed might end up being slower to lower interest rates.”
On Oct 18, the Dow and the S&P 500 both closed at record highs as all three major indexes closed out a sixth consecutive week of gains, their longest winning streak this year.
Many rate-sensitive megacap technology stocks slipped, such as Tesla.
After a fairly upbeat start to earnings season, the focus was on the 114 S&P 500 companies scheduled to report this week. These include Tesla, Coca-Cola and Texas Instruments.
Ahead of a busy week for earnings, some investors likely took some profits, according to analysts. David Laut, chief investment officer at Abound Financial, said the market was looking at how stretched valuations are.
Of companies that have reported so far, 83.1 per cent beat earnings estimates, according to data compiled by LSEG on Oct 18.
Monday’s declines were broad, with almost all 11 major S&P 500 sectors in the red.
The rate-sensitive Real Estate sector dropped as yields rose, while the technology sector was lifted by a jump in chip heavyweight Nvidia, which touched a fresh record high.
The economically sensitive small-cap Russell 2000 dropped.
Investors also looked ahead to the US presidential election, with polls showing chances improving for former President Donald Trump, the Republican candidate.
“As the election date approaches, even small changes in tight polls could drive seemingly erratic swings in market sentiment,” Danske Bank analysts said.
Meanwhile, Boeing jumped after news that workers could vote on a new deal to end a costly five-week strike.
Spirit Airlines skyrocketed 51.7 per cent after the company reached an agreement to extend a debt refinancing deadline by two months.
Humana slipped after a report said Cigna had resumed merger talks with the health insurer. Cigna’s shares also fell.
Home sales, flash PMI and durable goods reports are on the data docket through the week, as is the Fed’s Beige Book. REUTERS