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Stocks moved lower Thursday, continuing Wednesday’s sell-off trend, as Wall Street assessed a rise in interest rates and scrutinized the latest earnings results, offering insight into the health of corporations.
The S&P 500 slid 0.2%, while the Nasdaq Composite hovered near the flatline. The Dow Jones Industrial Average fell 40 points, or 0.1%.
A pop in yields pressured equities, with the benchmark 10-year Treasury yield trading around 4.1% and its highest level since November 2022. The rise in rates also pressured the real estate sector, which dropped more than 2%, while the Cboe Volatility index spiked to its highest level since June.
“There’s an overhang,” said Bryce Doty, portfolio manager at Sit Investment Associates. “As yields are drifting higher, it’s putting pressure on stocks. If you saw yields reverse today, I think the stock market would end up in the black.”
Many on Wall Street have also noted that the market’s been long overdue for a pullback, or slight correction, after hitting rally-mode for the better part of the year.
“Momentum has been quietly eroding over the last few weeks and was the motivation for our correction hunch a few weeks back,” said Chris Verrone, Strategas head of technical and macro research in a Thursday note. “Experience reminds us that such episodes usually work in a three-step process… break, tepid rally, break again,” although the longer-term trend is up.
The busy earnings week carried on, with chipmaker Qualcomm losing 10% on a third-quarter revenue miss and disappointing guidance. PayPal slumped more than 11% after posting in-line results and a decline in active accounts, while Moderna gained 1.5% on a boosted Covid vaccine outlook.
The market faces another major earnings test Thursday as tech bellwethers Apple and Amazon report results. Thus far, nearly 79% of S&P 500 companies have issued quarterly reports, with about 82% beating expectations, according to FactSet.
Stocks hit sell-off mode Wednesday after Fitch Ratings cut the long-term foreign currency issuer default rating for the U.S. to AA+ from AAA, citing “expected fiscal deterioration” over the next three years. The Nasdaq dropped 2% for its worst day since February as bond yields ticked higher. The S&P and Dow also closed lower.
In other news, the Bank of England on Thursday hiked interest rates by 25 basis points, in the latest move by a global central bank to tame inflation.
Wall Street also assessed the latest economic data, including in-line weekly jobless claims and second-quarter productivity data that showed an uptick.
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