NEW YORK,. US stocks were lower yesterday afternoon following a slew of high-profile earnings disappointments, but indexes were off the day’s lows and the S&P 500 eased off correction levels.
Data earlier in the day showed the US economy continued to grow at a healthy pace, offering some support.
US gross domestic product growth slowed less than expected in the third quarter as a tariff-related drop in soybean exports was partially offset by the strongest consumer spending in nearly four years and a surge in inventory investment.
While economic growth is healthy despite trade wars, the same cannot be said of US corporate profit growth, with disappointing forecasts this earnings season showing how tariffs, rising wages and borrowing costs as well as jitters over geopolitical events are hurting companies.
The latest came last night from Amazon.com Inc and Alphabet Inc, two stocks that have helped power the equity markets decade-long bull run.
Google-parent Alphabet’s revenue missed estimates, fanning concerns that regulatory scrutiny and competition would throttle its scorching pace of growth. The stock recovered from an earlier drop of as much as 5.6 per cent to trade down 3.2 per cent.
Amazon tumbled 8.2 per cent after it missed quarterly sales estimates and gave a below par holiday-season sales forecast.
Some investors saw the selloff as a buying opportunity.
“It’s been a very controlled selloff,” said Jim Paulsen, chief investment strategist at The Leuthold Group in Minneapolis.
While he expects further downside in the market, Paulsen said many investors are looking for chances to buy. “Most people I would argue are sitting around talking about where do we buy. They look at this still more as a buying opportunity than a risk.”
The Dow Jones Industrial Average fell 333.12 points, or 1.33 per cent, to 24,651.43, the S&P 500 lost 52.84 points, or 1.95 per cent, to 2,652.73 and the Nasdaq Composite dropped 168.79 points, or 2.31 per cent, to 7,149.55.
The S&P 500 was on course for its worst month in more than nine-and-a-half years and at the day’s low was on pace to confirm it was in correction territory, a level when an index closes 10 per cent or more below its all-time closing high.
The Nasdaq confirmed a correction earlier this week.
Facebook Inc, Apple Inc and Netflix Inc , the other members of the so-called FAANG group, were also down.
While indexes pared their gains, investors still worried about more near-term volatility, particularly ahead of the November 6 US midterm congressional elections.
“If you’re not a short-term buyer, why not wait?” said Bucky Hellwig, senior vice president at BB&T Wealth Management in Birmingham, Alabama
Declining issues outnumbered advancing ones on the NYSE by a 2.66-to-1 ratio; on Nasdaq, a 1.97-to-1 ratio favoured decliners.
The S&P 500 posted no new 52-week highs and 87 new lows; the Nasdaq Composite recorded 12 new highs and 298 new lows. — Reuters