By Mark DeCambre, MarketWatch
U.S. stocks extended losses at midday, building on a decline
that came as investors reacted negatively to Federal Reserve
minutes that were interpreted as slightly hawkish, as well as a
tough day for Chinese equities
(http://www.marketwatch.com/story/asian-markets-pull-back-led-by-sharp-declines-in-china-2018-10-17),
which sank to new four-year lows.
How are benchmarks performing
The Dow Jones Industrial Average fell 334 points, or 1.3%, to
25,374, and those for the S&P 500 index declined by 38 points
to 2,771, a fall of 1.4%. Meanwhile the Nasdaq Composite Index was
down 143 points, or 1.9%, to 7500, in morning trading.
On Wednesday, the Dow finished the day down 91.74 points, or
0.4%, at 2706.88. The S&P 500 lost 0.71 point, or less than
0.1%, falling to 2,809.21, while the Nasdaq Composite Index shed
2.79 points to close at 7,642.70.
The three main benchmarks haven't posted consecutive losses
since Oct. 11, according to FactSet data.
What's driving markets?
Chinese stock markets touched a fresh four-year low and a
seemingly hawkish Fed has combined to undercut investor sentiment
on Thursday.
The minutes of the Fed's September meeting, released on
Wednesday, indicated that policy makers are prepared to forge ahead
(http://www.marketwatch.com/story/federal-reserve-minutes-indicate-interest-rates-will-have-to-rise-high-enough-to-slow-down-the-economy-2018-10-17)
with increases and will likely hike rates again as early as
December, as expected. Tightening policy comes as no surprise but
it does elevate concerns about increasing borrowing costs and the
impact that that could have on equity prices, market participants
say.
Last week's downdraft in stocks was attributed partly to a jump
in yields of U.S. government bonds, which can also undercut
appetite for stocks compared against so-called risk-free Treasurys.
Rates hikes are expected to drive yields higher still.
Read:Here's why stock-market investors suddenly freaked out over
rising bond yields
(http://www.marketwatch.com/story/stock-market-investors-are-right-to-be-frightened-by-rising-bond-yields-economist-2018-10-12)
Concerns about the vitality of Asian markets, in particular
China's, may also be weighing on the investment mood. Shanghai's
composite index fell 2.9% and the Shenzhen A-Share dropped 2.7%.
Weakness in Beijing's markets came after China's currency, the
yuan, briefly touched its weakest level since January of 2017. One
buck last fetched 6.9379 yuan , up 0.2%. Those currency moves came
after Treasury refrained from labeling China a currency manipulator
(http://www.marketwatch.com/story/us-treasury-declines-to-label-china-a-currency-manipulator-but-says-recent-yuan-weakness-is-a-concern-2018-10-17)
in its biannual report on currency practices released late
Wednesday.
The U.S. and China have been locked in a trade spat that doesn't
show signs of easing and that threatens to produce intermittent
headwinds for markets.
Which stocks are in focus?
Philip Morris International Inc. shares (PM) jumped 3.4% after
the company beat earnings estimates for the third quarter.
United Rentals Inc. (URI) was the S&P's biggest loser,
falling 9.4% after the equipment-rental company beat Wall Street
estimates for the quarter
(http://www.marketwatch.com/story/united-rentals-shares-slide-after-earnings-2018-10-17)
but said its outlook didn't include a pending $2.1 billion
acquisition.
Caterpillar Inc.(CAT) led the Dow's descent, with shares
slipping 3.9% ahead of the firm's earnings release on Oct. 23.
Alcoa Corp. shares (AA) popped higher following
better-than-expected earnings
(http://www.marketwatch.com/story/alcoa-stock-rises-on-earnings-beat-company-predicts-2018-aluminum-deficit-2018-10-17),
and predictions from executives of an aluminum deficit for this
year. The stock is up 7.3%.
Invesco Ltd.(IVZ) shares rose 2.6%, after it announced the
acquisition of OppenheimerFunds, a subsidiary of Massachusetts
Mutual Life Insurance.
Endocyte Inc. shares (ECYT) soared more than 50% after Novartis
AG(NOVN.EB) (NOVN.EB) said it would buy the cancer-drug maker for
$2.1 billion
(http://www.marketwatch.com/story/novartis-lifts-view-announces-21b-endocyte-deal-2018-10-18).
Shares of Travelers Cos. Inc. fell 1.4% in morning action, even
as it posted earnings
(http://www.marketwatch.com/story/travelers-profit-rises-as-catastrophe-losses-fall-2018-10-18)and
revenue above analyst expectations.
Danaher Corp. (DHR), stock is down 2.3% Thursday morning, though
it too announced third quarter earnings and revenue above analyst
estimates.
Earnings reports for American Express Co. (AXP) and PayPal
Holdings Inc. (PYPL) were due after the close.
Which data are in focus?
First-time jobless claims fell by 5,000 from a week ago, as the
Labor Department reported just 210,000 Americans applying for
initial jobless benefits in the week ending Oct. 13, in line with
economist estimates, according to a poll by MarketWatch, and close
to 49-year lows
(http://www.marketwatch.com/story/jobless-claims-drop-5000-to-210000-in-mid-october-2018-10-18).
The Philly Fed manufacturing index came in slightly below
(http://www.marketwatch.com/story/philly-fed-manufacturing-index-signals-steady-growth-in-october-2018-10-18)last
month's reading, with a print of 22.2 in October, compared with
22.9 in September. Still, the figures were above expectations and
indicate healthy activity in the factory sector.
The Conference Board said its leading economic indicators rose
0.5% in September.
What are strategists saying?
Tom Essaye, president of the Sevens Report, pointed to weak
export Japanese export data and a poor showing in the Chinese
equities market as reason for softness in premarket trading
Thursday morning.
"Are any of those hugely negative events for U.S. equities?
Probably not, but we need some good news for the market to turn
higher," he said. Essaye predicted that as earnings season heats up
next week, that good news will be on the offing, " But until we get
a solid run of earnings growth and macro data, the stocks will move
sideways, if not down."
Jay Hatfield, CEO and portfolio manager Infrastructure Capital
Management, blames recent weakness in stocks on "normal October
stock market behavior," that is a result of increased short
interest and a decline in buybacks that typically occur in the
lead-up to earnings season. "We are going to be range bound for the
next week or so as we find the bottom," he said.
(END) Dow Jones Newswires
October 18, 2018 12:14 ET (16:14 GMT)
Copyright (c) 2018 Dow Jones & Company, Inc.
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