US stocks fall modestly on housing data, mixed earnings

US stocks fell more than 1 per cent on Thursday as the European Commission issued a warning regarding Italy's budget and concerns mounted over the possibility of strained relations between the US and Saudi Arabia.
A home under construction is offered for sale in Chicago, Illinois, on April 24, 2018.
A home under construction is offered for sale in Chicago, Illinois, on April 24, 2018.PHOTO: AFP

NEW YORK (AFP) - Wall Street stocks finished modestly lower on Wednesday (Oct 17) amid lingering worries over higher US interest rates following mixed earnings and lackluster housing data.

The Dow Jones Industrial Average lost the most of the major indices, falling 0.4 percent to 25,706.68, weighed down by a big drop in IBM shares. That was still more than 200 points above the session low.

The broad-based S&P 500 and tech-rich Nasdaq Composite Index both lost less than 0.1 percent, with the former at 2,809.21 and the latter at 7,642.70.

US stocks have been pressured much of October as US Treasury yields have lurched higher. Wall Street suffered a bruising two-day rout last week that was partly recovered in a strong session on Tuesday.

"Earnings seem to be more good than bad," said Art Hogan, chief market strategist at B. Riley FBR, who was encouraged that the markets held on to most of their gains from Tuesday.

But Brian Battle, director at the Performance Trust Capital Partners, said markets would need to reprice stocks now that central banks were exiting a period of extraordinary low interest rates and monetary stimulus.

Minutes from the Federal Reserve's meeting last month confirmed that most policy makers expect more gradual interest rate hikes.

 

"As this policy begins to reverse, it is going to be destabilizing," Battle said. "There will be days where we sell off 500 and then recover 500, then sell off 250 and recover 250."

Dow member IBM sank 7.6 per cent after the technology giant reported a drop of two percent in third-quarter revenues to US$18.8 billion, below analyst expectations.

But other companies had strong results, including Netflix, which surged 5.3 per cent after reporting that quarterly profit more than tripled to US$403 million and United Continental, which gained 6.0 per cent after profits rose almost 30 per cent to US$836 million.

Home improvement retailers Home Depot and Lowe's tumbled 4.4 per cent and 3.3 percent respectively after Credit Suisse downgraded both companies, writing that moderating housing prices due to higher interest rates would pinch demand at the retailers.