Blue Chips Drop Broadly on Weak Profits -- WSJ
October 26 2017 - 03:04AM
Dow Jones News
By Amrith Ramkumar and Riva Gold
This article is being republished as part of our daily
reproduction of WSJ.com articles that also appeared in the U.S.
print edition of The Wall Street Journal (October 26, 2017).
-- U.S. stocks fall after downbeat earnings
-- Chipotle, Advanced Micro Devices among biggest decliners
-- Bond yields rise
A raft of downbeat earnings sparked broad declines in U.S.
stocks Wednesday, sending the Dow industrials down 112 points in
their worst day since early September.
Results from American companies have generally been solid,
investors and analysts said. But after several quarters of strong
earnings, some cautioned that expectations are high, which could
limit gains in stocks.
"Big beats don't surprise people anymore," said Mohit Bajaj,
director of ETF trading solutions at WallachBeth Capital. "The
downward pressure is much stronger," he said.
The Dow Jones Industrial Average closed down 0.5% at 23329.46
after shedding 191 points earlier in the session. The S&P 500
declined 11.98 points, or 0.5%, to 2557.15, with all 11 of its
major sectors posting losses. Both indexes had their worst session
since Sept. 5. The Nasdaq Composite shed 34.54 points, or 0.5%, to
6563.89.
Roughly 36% of the S&P 500 has reported earnings as of late
Wednesday, and 74% of those firms have beat expectations compared
with the five-year average of 69%, according to FactSet.
Still, relatively weak earnings from some firms Wednesday led
investors to take profits because of the market's almost
uninterrupted run this year, said Yousef Abbasi, global market
strategist at JonesTrading Institutional Services.
"It's just a friendly reminder that the market can go down
sometimes," he said, noting that strong earnings from a few firms
propelled the Dow industrials to another record close Tuesday.
Shares of Chipotle Mexican Grill fell $47.29, or 15%, to $277.01
-- their worst day in five years -- after the fast-casual chain
missed forecasts for earnings and sales and said it would open
fewer locations than previously forecast.
Advanced Micro Devices shares tumbled 1.92, or 13%, to 12.33
after the chip maker forecast margins to remain flat and revenue to
decrease in the current quarter.
AT&T, Boeing and Dr. Pepper Snapple Group also traded lower
after the firms released results.
Government bond investors largely focused on the outlook from
central banks. The yield on the 10-year U.S. Treasury note rose to
2.444% Wednesday -- its highest close since March -- from 2.406%
Tuesday amid speculation about who the next Federal Reserve chair
will be. Yields rise as prices fall.
Treasurys extended losses after data was released showing demand
for long-lasting U.S. factory goods remained robust last month.
The European Central Bank is widely expected to announce plans
to unwind its massive bond-purchase program at its meeting on
Thursday, keeping some investors on edge. The program has made
European government debt more scarce and helped drag down yields
globally.
"Monetary policy is a major risk in 2018," said François Savary,
chief investment officer at Geneva's Prime Partners. As central
banks unwind crisis-era stimulus polices, "the most difficult part
is still ahead of us," he said.
The Bank of Canada on Wednesday left its policy interest rate
unchanged at 1% after increases in July and September, vowing to be
cautious in future deliberations as growth is expected to slow.
The British pound jumped 0.9% against the dollar after
third-quarter U.K. GDP rose 0.4%, reinforcing expectations for the
Bank of England to raise interest rates as soon as next month.
The Stoxx Europe 600 fell 0.6%, with a flurry of corporate
results driving swings in individual stocks.
Earlier, Japan's Nikkei Stock Average fell 0.4% to end a
historic 16-session winning streak. Hong Kong's benchmark index
rose 0.5% after China's new lineup of leaders was named.
Write to Amrith Ramkumar at amrith.ramkumar@wsj.com and Riva
Gold at riva.gold@wsj.com
(END) Dow Jones Newswires
October 26, 2017 02:49 ET (06:49 GMT)
Copyright (c) 2017 Dow Jones & Company, Inc.
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