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

  • Microsoft, Alphabet drops on slowdown fears
  • Bank of Canada announces smaller-than-expected 50 bps hike
  • Boeing earnings miss sends shares falling
  • Visa gains on Q4 profit beat as payment volumes surge
  • Indexes: Dow up 0.50%, S&P off 0.16%, Nasdaq down 1.30%

NEW YORK, Oct 26 (Reuters) – Wall Street wavered on Wednesday, poised to snap a three-day rally as dour earnings guidance added to mounting 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.

“Central banks are starting to blink,” said Paul Kim, Chief Executive Officer at Simplify ETFs in New York. “It’s part of the larger trend and supports the (Fed) ‘pivot’ narrative.”

Reuters Graphics

The S&P 500 and the Nasdaq were last in negative territory, dragged lower by market-leading tech and tech-adjacent companies following results from Microsoft (MSFT.O) and Alphabet (GOOGL.O).

Microsoft and Alphabet shares were last down 6.0% and 8.0%, respectively.

Those gloomy 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.

At 2:13 p.m. (1813 GMT), the Dow Jones Industrial Average (.DJI) rose 160.68 points, or 0.5%, to 31,997.42, the S&P 500 (.SPX) lost 6.06 points, or 0.16%, to 3,853.05 and the Nasdaq Composite (.IXIC) dropped 145.97 points, or 1.3%, to 11,053.15.

Among the 11 major sectors of the S&P 500, communications services (.SPLRCL) and tech (.SPLRCT) 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 now see aggregate S&P 500 earnings growth of 2.3%, down from 4.5% at the beginning of the month, per Refinitiv.

Among the initial takeaways so far this earnings season, Kim said “two themes are emerging: labor costs and dollar strength.”

“Dollar strength is a headwinds for larger companies with international revenues,” Kim added.

Boeing Co (BA.N) reported a deeper than expected third quarter loss, sending its shares sliding 7.9%.

On the plus side, Visa Inc (V.N) rose 4.7% in the wake of the consumer credit company’s profit beat.

Advancing issues outnumbered declining ones on the NYSE by a 2.97-to-1 ratio; on Nasdaq, a 2.20-to-1 ratio favored advancers.

The S&P 500 posted 25 new 52-week highs and 2 new lows; the Nasdaq Composite recorded 87 new highs and 54 new lows.

(This story has been corrected to delete reference to Apple earnings)

Reporting by Stephen Culp; Additional reporting by Amruta Khandekar and Shreyashi Sanyal in Bengaluru; editing by Grant McCool

Our Standards: The Thomson Reuters Trust Principles.

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