S&P 500 ends lower, snapping rally on mounting slowdown fears

With Microsoft and Google foundering in after hours trading yesterday, there was a consensus that today the market would fall.  Indeed, after a promising morning with continuing soft data still supporting hopes for a Fed slowdown, the two megacaps brought everything down. The Dow was up over 330 points by 11 a.m. but quickly crashed the rest of the day to close at break-even.  Tech, of course, was hit much harder as was the S&P. 

 

One-third of the S&P has reported with 75% beating estimates. This has raised a curious question with today’s expert commenting, “There have been pockets of corporate earnings announcements this quarter.  I don’t think it’s necessarily a fait accompli that we’re going to continue to see earnings misses across the board.”  Pockets? Really? How does 75% beating estimates equal pockets? How does one bad day equal a fait accompli on misses?  Volume was above average at nearly 12.3 billion. 

Wed  October 26, 2022  6:26 PM

S&P 500 ends lower, snapping rally on mounting slowdown fears

By Stephen Culp

DJ: 31,836.74  +337.12        NAS: 11,199.12  +246.50        S&P: 3,859.11  +61.77     10/25

DJ: 31,839.11  +2.37            NAS: 10,970.99  -228.12         S&P: 3,830.60  -28.51      10/26

NEW YORK, Oct 26 (Reuters) - The S&P 500 ended a three-day winning streak on Wednesday, closing in negative territory as gloomy earnings guidance added to growing fears of a global economic slowdown.  But those fears, along with a smaller-than-expected interest rate hike from the Bank of Canada, continued to feed hopes that the Fed might consider easing the size of its rate hikes after its Nov. 1-2 policy meeting.

"Today the market is catching up with the move upward over the last week or so," said Matthew Keator, managing partner in the Keator Group, a wealth management firm in Lenox, Massachusetts. "There are still two Fed meetings ahead of us this year."  Paul Kim, Chief Executive Officer at Simplify ETFs in New York, agrees.  "Central banks are starting to blink," Kim said. "It’s part of the larger trend and supports the pivot narrative."

The S&P 500 and the Nasdaq ended in negative territory, dragged lower by market-leading tech and tech-adjacent companies following results from Microsoft and Alphabet. The blue-chip Dow eked out a nominal gain.  Microsoft and Alphabet shares tanked, falling 7.7% and 9.1%, respectively.  Those downbeat reports brought worries over an impending global economic downturn from simmer to boil, and spread to other high profile megacaps.  Sales of newly constructed U.S. homes plunged in September while mortgage rates hit their highest level in more than two decades, adding to the growing pile of data suggesting a softening economic landscape.

The Dow Jones Industrial Average rose 2.37 points, or 0.01%, to 31,839.11, the S&P 500 lost 28.51 points, or 0.74%, to 3,830.6 and the Nasdaq Composite dropped 228.12 points, or 2.04%, to 10,970.99.  Five of the 11 major sectors of the S&P 500 ended the session in the red, with communications services and tech were suffering the largest percentage losses.

Third quarter earnings season has shifted into high gear, with 170 of the companies in the S&P 500 having reported. Of those, 75% have delivered consensus-beating results, according to Refinitiv.  But they have a low bar to clear. Analysts see aggregate S&P 500 earnings growth of 2.3%, down from 4.5% at the beginning of the month, per Refinitiv.  "There have been pockets of promising corporate earnings announcements this quarter," Keator added. "I don’t think it's necessarily a fait accompli that we’re going to continue to see earnings misses across the board."

Boeing Co reported a deeper than expected third quarter loss, sending its shares sliding 8.8%.  On the plus side, Visa Inc rose 4.6% in the wake of the consumer credit company's profit beat.  Facebook parent Meta Inc shares fell more than 12% in after-hours trading after posting results.

Advancing issues outnumbered declining ones on the NYSE by a 1.71-to-1 ratio; on Nasdaq, a 1.41-to-1 ratio favored advancers.  The S&P 500 posted 25 new 52-week highs and 3 new lows; the Nasdaq Composite recorded 113 new highs and 77 new lows.

Volume on U.S. exchanges was 12.26 billion shares, compared with the 11.60 billion average for the full session over the last 20 trading days.