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Market Snapshot: U.S. stocks extend losses in choppy session as investors assess earnings, rising bond yields

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U.S. stock indexes traded lower on Wednesday afternoon in choppy trade, as investors weighed Netflix’s surprisingly positive earnings report and monitored a continued rise in Treasury yields.

How are stock indexes trading

The Dow Jones Industrial Average
DJIA,
-0.87%

was down 190 points or 0.6%, at 30,332.

The S&P 500
SPX,
-1.21%

was off 36 points, or 1%, at 3,683.

The Nasdaq Composite
COMP,
-9.67%

 declined 119 points, or 1%, at 10,653.

On Tuesday, the Dow rose 551 points, or 1.9%, while the S&P 500 rose 2.7% and the Nasdaq Composite gained 3.4%. The S&P 500 was up 4% from its 2022 closing low through Tuesday but remained down 22% for the year to date.

What’s driving markets

Stocks struggled out of the gate after back-to-back gains as worries about stubbornly high inflation counteracted positive news on company earnings.

Equities were buoyed, however, by a well-received update from Netflix Inc.
NFLX,
+13.21%

late Tuesday that cemented the impression that the third-quarter earnings season would support the market. Netflix shares were up 16% to lead S&P 500 gainers.

Opinion: Netflix stock could be even more volatile around future earnings, thanks to this change

With 45 members of the S&P 500 index having reported through Tuesday, 69% have beaten profit expectations, according to Refinitiv. The high proportion of beats comes as investors are the most pessimistic since the great financial crisis of 2008 about future profit growth, according to a fund manager survey by Bank of America.

Source: Bank of America

Other earnings highlights on Wednesday include Procter & Gamble Co.
PG,
+1.27%
,
and after the close, Tesla Inc.
TSLA,
+0.03%

and International Business Machines Corp.
IBM,
-0.69%
.

“What will really be the story going into next year, is that a lot of strategists have thought that we’re going to be having an earnings recession that’s down potentially 20% from the current earnings, and if the companies can prove that’s not going to be the case and that they can continue to grow, that can have a big impact on the market,” Christian Ledoux, director of investments at CAPTRUST, said in an interview. “We could have a pretty good rally off that news.”

Read: It’s the 35th anniversary of the 1987 stock-market crash: What investors need to know

However, news that U.K. inflation was back at a 40-year high of 10.1% reminded traders that central banks’ determination to battle such price pressures meant yet tighter monetary policy.

This has helped push the U.S. 10-year Treasury yield
TMUBMUSD10Y,
4.117%

further above the significant 4% mark, rose to 4.114% as the equivalent duration U.K. gilt
TMBMKGB-10Y,
3.877%

declined 7.1 basis points to 3.877%.

“As has been the case of late, any disturbance in global fixed-income markets immediately hemorrhages into risk,” said Stephen Innes managing partner at SPI Asset Management.

The jump in yields also comes from concerns that the Federal Reserve would continue its rate hike path at an aggressive path.

“We don’t get any news until Nov. 2 when the Fed meets, where most likely it’s going to be another 75 basis point hike. But I think the market is starting to incorporate the fact that perhaps a 50 basis point rise in December, which is what the consensus is now, might have to go to 75 (basis points),” Ledoux said.

Key Words: Stock-market selloff may mean another 20% drop for S&P 500, says Wall Street veteran

In U.S. economic data, construction on new U.S. homes fell 8.1% in September to a seasonally adjusted annual pace of 1.44 million, reversing a 13.7% increase in August, the Commerce Department said Wednesday. 

Investors were awaiting the Federal Reserve’s Beige Book of anecdotes to be released at 2 p.m. Eastern.

Minneapolis Fed President Neel Kashkari is due to speak at 1 p.m. and Chicago Fed President Charles Evans will deliver comments at 6:30 p.m.

Companies in focus

Procter & Gamble
PG,
+1.27%

shares were up 1.9% after the consumer packaged goods company reported fiscal first-quarter profit and sales that rose above expectations, as higher pricing provided a boost, but lowered its full-year sales outlook.

United Airlines Holdings Inc.
UAL,
+6.77%

stock rallied 7.3% Wednesday after the airline said Tuesday it expected the travel rebound to weather a shakier economy in the months ahead and reported third-quarter results that beat expectations.

Hair-care company Olaplex Holdings Inc.
OLPX,
-52.09%

shares lost half their value Wednesday after its management team dramatically reduced its financial outlook for the full year in the face of competitive and economic pressures.

Shares of Walt Disney Co.
DIS,
+0.53%

 advanced 1% as a strong earnings report from fellow streaming video provider Netflix Inc. likely provided a boost.

Ally Financial Inc.
ALLY,
-8.34%

 shares fell 6.7% Wednesday after the mortgage, car loan and banking provider’s adjusted earnings per share and revenue fell short of analyst targets. 

Adobe Inc.
ADBE,
+1.58%

shares rose 2.5% Wednesday after the software company did what many tech companies have not this earnings season: Stick to its forecast.

Abbott Laboratories
ABT,
-7.13%

 shares tanked 7.6% Wednesday after the company said it had earnings of $1.4 billion in the third quarter of 2022, compared with $2.1 billion in the same quarter a year ago. The company reported that sales fell 4.7% to $10.4 billion in the third quarter, partly due to shortages of baby formula since the start of the year, and falling sales of COVID-19 tests.

Jamie Chisholm contributed reporting

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