U.S. stocks slid Thursday following reports that Chinese officials doubted whether a trade deal would get done. Some weaker-than-expected new economic data also contributed to a sell-off in risk assets. Gold and Treasuries were bid higher.
Meanwhile, investors also continued to digest the Federal Reserve’s latest interest rate cut and commentary, as well as a host of major corporate quarterly results as earnings season rolled on.
Here’s where the markets settled at the end of regular equity trading:
S&P 500 (^GSPC): -0.3%, or 9.21 points
Dow (^DJI): -0.52%, or 140.46 points
Nasdaq (^IXIC): -0.14%, or 11.62 points
WTI crude oil prices: (CL=F): -1.6% to $54.18 per barrel
10-year Treasury yield (^TNX): -11.2 bps to 1.684%
Gold (GC=F): +1.14% to $1,513.70 per ounce
Chinese officials have reportedly suggested that they will not be willing to make concessions on some of the major economic reforms the Trump administration has called for to reach an eventual long-term trade deal, according to a Bloomberg report Thursday citing unnamed people familiar with the matter.
The officials are also reportedly concerned that President Donald Trump may renege on the phase one trade agreement the two sides have aimed to get in writing by mid-November. Contracts on the major U.S. stock indices fell following the report.
However, President Donald Trump later added kindling to hopes that the first phase of a trade deal would get signed.
“China and the USA are working on selecting a new site for signing of Phase One of Trade Agreement, about 60% of total deal, after APEC in Chile was canceled do to unrelated circumstances,” Trump wrote in a Twitter post around market open. “The new location will be announced soon. President Xi and President Trump will do signing!”
Earlier, futures had been higher after the Federal Reserve’s third consecutive ease to the benchmark interest rate this year Wednesday afternoon. In their monetary policy statement, Federal Open Market Committee members suggested that rates may not go any lower in the near-term unless the economic outlook deteriorates further.
In his subsequent press conference, Federal Reserve Chair Jerome Powell suggested rates would not go higher, either, unless inflation bumped up – a catalyst that seems far-removed in the near-term given recent persistently low inflationary signals.
But while the Fed may have steered market expectations away from its previously more dovish posturing, other central banks continued to hint at further accommodation. The Bank of Japan on Thursday kept benchmark interest rates unchanged but doubled down on a pledge to lower interest rates in the event that inflation slows further. Japan’s core inflation in September was a paltry 0.3%, well below the central bank’s 2.0% target.
The BOJ, in its October monetary policy statement, added a line saying it expects rates to remain “at their present or lower levels as long as it is necessary to pay close attention to the possibility that the momentum toward achieving the price stability target will be lost.”
A host of consumer-facing corporate names reported quarterly earnings Wednesday after market close, with most of these results coming in ahead of expectations.
Apple (AAPL) posted adjusted earnings per share of $3.03 on revenue of $64 billion for its fiscal fourth quarter, beating expectations for $2.83 in adjusted EPS on sales of $63.01 billion, according to Bloomberg-compiled consensus data. The company topped expectations for both Services and iPhone sales, suggesting the tech giant’s hardware demand remains intact even as it expands its ecosystem to include software offerings. Apple’s guidance for holiday quarter sales and margins also exceeded the Street’s expectations.
Facebook (FB) surpassed top- and bottom-line expectations from the Street as the social media company’s core advertising business remained resilient despite scrutiny over its political ads and data policies and recent cryptocurrency ambitions. Quarterly adjusted earnings of $2.12 per share on revenue of $17.65 billion were stronger than the $1.91 per share on revenue of $17.35 billion expected. Daily and monthly active users of 1.62 billion and 2.45 billion, respectively, were roughly in-line with consensus.
Lyft (LYFT), the No. 2 ride-hailing company in the U.S., narrowed its losses in the third quarter, topped revenue expectations and raised its full-year guidance, as rider growth continued and pricing power improved during the period. Lyft’s adjusted loss per share of 41 cents was smaller than the 72-cent loss expected, and revenue of $955.6 million was ahead of consensus estimates for $916.2 million. Earlier this month, Lyft’s co-founders had said they expected to be adjusted EBITDA positive by the fourth quarter of 2021, a year earlier than expected.
Starbucks (SBUX) continued to show growth in its key U.S. market despite encroaching competition in the fast food and breakfast space, and underscored further opportunities in China. Fiscal fourth-quarter comparable same-store sales – a closely watched measure in the restaurant industry – rose 5%, or a percentage point better-than-expected. Comp sales in the Americas grew 6%, better than the 4.5% expected. Adjusted earnings per share of 70 cents met expectations, as did operating margins of 17.2%.
ECONOMY: Weekly jobless claims rise more-than-expected
Weekly unemployment claims rose slightly more-than-expected for the week ended Oct. 26, the Department of Labor reported Thursday.
New unemployment claims were at a seasonally adjusted annual pace of of 218,000, an increase of 5,000 from the week prior’s upwardly revised level. Continuing jobless claims unexpectedly rose for the week ended Oct. 19, reaching 1.69 million from 1.683 million the week prior.
This week’s jobless claims report comes a day before the Department of Labor releases its October jobs report. Consensus economists expect non-farm payrolls rose by just 85,000 for the month amid some short-term factors including the 40-day United Auto Workers strike. On Wednesday, ADP/Moody’s showed private payrolls grew more-than-expected to 125,000, higher than the 110,000 expected.
Separately, personal income growth decelerated by the expected amount in September while growth in spending came up slightly short, the Bureau of Economic Analysis said Thursday. Personal income rose 0.3% for the month after rising 0.5% in August. Personal spending growth of 0.2% matched August’s pace, but was just short of the 0.3% increase expected.
The ISM Chicago business barometer fell to a reading of 43.2 in October, reflecting the lowest level of regional manufacturing activity in four years. This missed expectations for 48.0 and dropped from September’s reading of 47.1. Results below 50.0 indicate contraction.
A plunge in demand, with the new orders index weakening to the lowest level since 2009, led declines in the index.
“The picture ... is one of continued stress in the manufacturing economy, thanks mostly to the direct impact of the tariffs and the uncertainty over the future direction of trade policy,” Ian Shepherdson, chief economist for Pantheon Macroeconomics, wrote in an email Thursday about the Chicago PMI.
The Institute for Supply Management releases its national U.S. purchasing managers’ index Friday at 10 a.m. ET.
Emily McCormick is a reporter for Yahoo Finance. Follow her on Twitter: @emily_mcck
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