The Dow fell Thursday and the S&P 500 and Nasdaq edged up as investors weighed weak domestic economic data against the most recent batch of corporate earnings results.
Here’s where the markets settled Thursday:
S&P 500 (^GSPC): +0.19%, or 5.77 points
Dow (^DJI): -0.11%, or 28.42 points
Nasdaq (^IXIC): +0.81%, or 66 points
10-year Treasury yield (^TNX): +1.5 bps to 1.773%
Gold (GC=F): +0.64% to $1,505.30 per ounce
Thursday morning, the U.S. Census Bureau reported that durable goods orders fell 1.1% in September, missing expectations for a drop of just 0.7%, according to Bloomberg consensus data. Excluding transportation products, orders for durable goods – or those intended to last three years or more – fell 0.3%, after rising a downwardly revised 0.3% in August, the Census Bureau said in its advance report. Analysts said the weakness reflects, in part, Boeing’s (BA) ongoing 737 Max troubles and protracted General Motors (GM) strike.
Core capital goods orders, which serve as a proxy for businesses’ future spending plans, also fell more-than-expected for the month, dropping 0.5% in September versus a 0.1% decline expected.
Meanwhile, disappointing earnings results from 3M (MMM) also reflected the ongoing downtrend in the industrial sector, with the conglomerate posting disappointing third-quarter sales and slashing its profit forecast for the full year.
“While the macroeconomic environment remains challenging, we executed well and built on the progress we made in the second quarter,” 3M CEO Mike Roman said in a statement. “Moving ahead we’ll continue to focus on driving operational improvements and investing for the future, which will position us for strong growth and premium returns as our markets recover.”
Overseas, the European Central Bank (ECB) kept its main refinancing, marginal lending facility and deposit facility rates unchanged at 0.000%, 0.250% and -0.500%, respectively, as had widely been anticipated. The central bank said it intends to keep interest rates “at their present or lower levels” until the inflation outlook nears 2%. Euro area inflation rose just 0.8% in September, the lowest level in nearly three years.
The ECB also confirmed the resumption of its quantitative easing program, which was first unveiled last month. Purchases of 20 billion euros per month are set to begin Nov. 1. It will keep these asset purchases running “as long as necessary to reinforce the accommodative impact of its policy rates,” the ECB said.
“Effectively this means that the central bank is now locked-in at a very accommodative monetary stance, and it is difficult to see it shifting to a more hawkish position within the next 12 months,” Claus Vistesen, chief eurozone economist for Pantheon Macroeconomics, wrote in a note Wednesday.
This rate decision marks the last in Mario Draghi’s eight-year tenure as ECB chief before Christine Lagarde, former chair of the International Monetary Fund, takes the reins.
Policymakers have kept euro area rates persistently low in hopes of stimulating the bloc’s flagging economies. On Thursday, IHS Markit said service sector activity in Germany – the eurozone’s biggest economy – fell to its lowest in more than three-years in October, and employment declined for the first time in six years.
Next week, the Federal Reserve is set to deliver its own monetary decision decision, with consensus analysts largely expecting a similarly dovish posturing. As of Thursday morning, markets priced in a 93.5% probability of a third consecutive quarter-point cut to key borrowing rates, according to CME Group data.
Earnings, earnings, earnings
Before the three major indices turned negative Thursday mid-morning, investors had weighed a mixed bag of quarterly earnings to the upside after big companies, including Microsoft (MSFT) and Tesla (TSLA), handily topped Wall Street’s expectations late Wednesday.
Initially, Microsoft’s stock was little changed after results showed decelerating growth in its cloud unit Azure, which competes with Amazon Web Services (AMZN). However, the stock pushed into the green Thursday morning, as investors considered the stronger-than-expected results on other measures.
The software giant delivered estimates-topping sales in its largest segment, More Personal Computing, which encapsulates Windows, Surface, search ads and gaming. Microsoft’s CFO Amy Hood also said during a call with analysts Wednesday that it expects Azure’s gross margins to improve.
Meanwhile, Tesla (TSLA) posted a surprise profit in the third quarter as gross margins improved on its flagship vehicles. The company also said it was ahead of schedule to ramp up production at its Shanghai Gigafactory, which will make it less costly for Tesla to deliver electric vehicles to customers in the key China market. It also pulled forward plans to launch the Model Y a season ahead of schedule, in summer 2020 rather than in the fall of that year.
However, other earnings were less upbeat. Twitter (TWTR) Thursday morning posted results that missed on every major measure, as advertising revenue and user growth slowed over the summer. North American revenue rose just 11% in the third quarter, decelerating from 32% growth in the year-ago period. The company attributed the miss to “headwinds including revenue product issues and greater-than-expected advertising seasonality in July and August.”
Shares of Twitter slumped more than 18% during intraday trading.
Emily McCormick is a reporter for Yahoo Finance. Follow her on Twitter: @emily_mcck
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