Stocks fluctuate as earnings rise, yields advance

US stocks extended a volatile trading streak on Thursday, as companies’ third-quarter financial results continued to rise against a backdrop of lingering growth concerns on Wall Street.

The S&P 500 (^GSPC) accelerated losses to fall 1% in afternoon trading, while the Dow Jones Industrial Average (^ DJI) lost about 130 points, or 0.4%. The high-tech Nasdaq Composite (^IXIC) fell 0.8%. Meanwhile, Treasury yields neared new multi-year highs, with the rate-sensitive 2-year note topping 4.6% for the first time since 2007 and the 10-year note well above 4.1 %, a level last seen in 2008.

The UK caught the attention of US investors again on Thursday morning with the resignation of Prime Minister Liz Truss after his administration unveiled a failed economic package that included plans for tax cuts that disrupted financial markets. The pound strengthened and UK bonds rose on the news that Truss will step down at the end of next week.

Back in the US, the Department of Labor reported an unexpected drop in the number of Americans who filed for unemployment insurance for the week ending October 15. Claims fell to 214,000 from a revised 226,000 last week, a sign the job market remains tight despite efforts to slow the economy to cool inflation. Economists surveyed by Bloomberg expected applications to total 230,000.

“The drop in initial jobless claims supports our view that the increases in the past two weeks were noise rather than signals, caused by seasonal adjustment issues,” Pantheon’s chief macroeconomist Ian Shepherdson said in a note. . “Also keep in mind that low claims numbers are no guarantee of strong payrolls; when demand first weakens, companies cut back on gross new hires before they start laying off existing staff.”

Mike Loewengart, head of model portfolio construction at Morgan Stanley’s Office of Global Investments, also noted that the number may not be enough to shift investors’ focus away from earnings, but strong employment data and inflation readings hot in the coming weeks will increase projections for a 75 -Basis point rate hike by the end of the year.

“Earnings season is in full swing, so investors are taking a closer look at guidance and expect volatility to remain elevated,” Loewengart said in an emailed comment.

In that sense, AT&T Inc. (T) and American Airlines (ALA) were the latest names to reveal third-quarter results that were better than analysts expected.

Telecoms giant AT&T on Thursday released figures that beat sales and profit forecasts and raised its profit forecast, also revealing 964,000 new subscribers and affirming its confidence to meet previously estimated cash flow for the rest of the year. The shares gained almost 8% on Thursday afternoon.

And American Airlines Group said Thursday that travel demand remains strong despite higher airfares as it raised its earnings forecast for the current quarter. The stock erased morning gains to drop more than 3% in the second half of the trading day.

Tesla stock (TSLA), meanwhile, sank about 7% after the electric vehicle maker published Tuesday night results that disappointed Wall Streetbeating earnings per share estimate but falling short of quarterly earnings expectations.

The company reiterated its earlier guidance of a 50% average annual growth rate in vehicle deliveries for the year, even as it admitted the headwinds of rising raw material costs and inefficiencies at its Gigafactory Berlin.

“I can’t stress enough that we have excellent demand for the fourth quarter and we expect to sell every car we make as far into the future as we can see,” Chief Executive Officer Elon Musk said, adding: “North America is in good shape.” good health, although the Fed is raising interest rates more than they should, but I think they will eventually realize that and lower them again”.

German Chancellor Olaf Scholz, Brandenburg Prime Minister Dietmar Woidke and Elon Musk attend the opening ceremony of Tesla's new Gigafactory for electric cars in Gruenheide, Germany, March 22, 2022. Patrick Pleul/Pool via REUTERS

German Chancellor Olaf Scholz, Brandenburg Prime Minister Dietmar Woidke and Elon Musk attend the opening ceremony of Tesla’s new Gigafactory for electric cars in Gruenheide, Germany, March 22, 2022. Patrick Pleul/Pool via REUTERS

Federal Reserve Bank of St. Louis President James Bullard he said in an interview with Bloomberg TV on Wednesday that he expects policymakers to stop the “frontloading” of sharp interest rate hikes early next year and move to smaller moves as needed until inflation subsides.

Your colleague in Pennsylvania, Philadelphia Fed President Patrick Harker also said In separate comments on Thursday, the central bank may pause the tightening process next year but took a more assertive tone on raising the short-term rate to fight inflation.

the Fed beige book, a release of economic assessments in the 12 US central bank districts, showed that companies have largely remained resilient amid the macro era of higher rates and tighter policies thanks to strong fixing power of prices. But some expressed their struggle with consumer pushback over rising prices and inflation that continued to drive up wages.

Corporate earnings so far have reflected resilience, but Wall Street strategists have largely warned that earnings-per-share forecasts will continue to decline.

“We’re becoming skeptical that this quarter will bring enough corporate earnings capitulation into next year’s numbers for the final price bottoms of this bear market to happen now,” Morgan Stanley chief equity strategist Mike Wilson said. he said earlier this week in a podcast. “The final price lows for this bear are likely to be closer to 3000-3200 when companies capitulate and guide 2023 forecasts lower during Q4 earnings season, which is in January and February.”

Alexandra Semenova is a reporter for Yahoo Finance. Follow her on Twitter @alexandraandnyc

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