NEW YORK (BLOOMBERG) - U.S. stocks slipped from an eight-week high amid corporate earnings reports, as Morgan Stanley joined banks posting results this season that disappointed investors.
Morgan Stanley fell 5.4 per cent, following Goldman Sachs Group Inc. and JPMorgan Chase & Co. in reporting a drop in bond- trading revenue. Energy and raw-material shares retreated for the first time in four days as oil and other commodities slipped after a reading showing slower growth in China.
The Standard & Poor's 500 Index lost 0.2 per cent to 2,029.14 at 10 a.m in New York (10 pm Singapore time), paring an earlier 0.5 per cent drop, after rising for a third straight week. The Dow Jones Industrial Average declined 31.86 points, or 0.2 per cent, to 17,184.11. The Nasdaq Composite Index was little changed.
"The earnings season and the expectations for a Fed rate hike are the key near-term factors," said Otto Waser, chief investment officer at R&A Group Research & Asset Management AG in Zurich.
"Expectations are still low for earnings and global companies are still suffering from a strong dollar. Still, we're not that far away from the levels at the start of August and we could get there this quarter."
The S&P 500 is rebounding from its worst quarter in four years, even as investor sentiment swings between concern over China's slowdown and optimism that the Federal Reserve is in no hurry to raise interest rates. The probability of a U.S. rate increase this year has diminished to 40 per cent, from 64 per cent before the Fed's September meeting, with March the first month for which traders price in at least even odds of a rate boost.
Federal Reserve Governor Lael Brainard, a permanent voter on the FOMC, is due to give a speech on regulation at 10 a.m. Richmond Fed chief Jeffrey Lacker, an FOMC voter for the next two meetings, speaks on education and gives a Q&A at 12 p.m. John Williams, San Francisco Fed chief and also an FOMC voter until January, is due to speak on Bloomberg TV at 2 p.m.
A report showed China's economy expanded quicker than economists forecast in the third quarter as the services sector offset weaker manufacturing. While the 6.9 per cent growth in gross domestic product was the slowest since 2009, the stabilization should ease fears of a deeper downturn.
"It's not a surprise the markets haven't responded much to China's GDP number because it wasn't that far from consensus," said Matt Maley, an equity strategist at Miller Tabak & Co LLC in New York. "People are going to be focusing on earnings, but I think earnings will have more of an impact on individual names than the overall market."
The S&P 500 is up 5.7 per cent in October and closed Friday at the highest level since Aug. 20. While the equity benchmark capped its longest weekly winning streak since May, investors withdrew$1.5 billion this month through Oct. 15 from an exchange-traded fund tracking the gauge.