The major U.S. equity averages stalled on Wednesday, as the Nasdaq and S&P 500 broke a three-session winning streak. Poorly received earnings from Alphabet and Microsoft weighed on the tech sector. However, strong results from Visa and 3M helped the Dow finish with a fractional gain.
Looking at the day’s closing numbers, the Dow Jones edged up by 2.37 points to close at 31,839.11. The S&P 500 retreated 28.51 points to finish at 3,830.60, while the Nasdaq slumped 228.12 points to end at 10,970.99.
Sector performance was mixed. Communication Services plunged 4.8%, while Info Tech retreated 2.2%. This came as Microsoft’s results sparked concerns about near-term PC demand and Alphabet raised a red flag concerning ad spending at YouTube.
Elsewhere, Energy and Health Care were among the sources of strength during the session. There were also gains in Consumer Staples, Materials, Industrials and Financials.
“At the end of the day, it seems as though today’s results in the market had less to do with overarching economic concerns and prospects, and more to do with the individual stories of individual companies,” Avaring Capital Advisors’ Daniel Jones told Seeking Alpha.
“This is not to say that results today will have no bearing on the near-term outlook. With earnings season still well underway, reactions to results from major companies are serving as mini daily referendums on the state of the market more broadly,” Jones added.
In the bond market, Treasury yields pushed lower again, adding to a downward move seen the previous day. The 10-year Treasury yield (US10Y) retreated 8 basis points to 4.03%, while the 2-year yield (US2Y) slipped 3 basis points to 4.43%.
Going into the session, stocks had finished higher in three straight sessions, further bouncing off yearly lows reached earlier this month. Falling yields helped drive gains on Tuesday.
“Rates are really driving U.S. equity markets,” Jefferies’ strategist Steven DeSanctis told Seeking Alpha. “In the last week or so, there has been some stability in the rates market, with the rates coming down … Yields may have peaked at least here in the short run and that’s driving stocks.”
In economic news, the latest reading for new home sales saw a continued decline in the housing market. The figure dropped 10.9% in September compared to the previous month, although the decline was not as steep as analysts had expected.
“The decline in September new home sales still leaves them much higher than is implied by mortgage demand, after sales surged in August,” Pantheon Macro said in a note. “This disconnect between sales and mortgage demand likely reflects buyers rushing to lock in mortgage deals before rates spiked higher; the 30-year mortgage rate held broadly steady through July and August but has since risen by nearly 140bp, to 7.16% last week.”
Among active stocks, Visa advanced on better-than-expected financial figures and the announcement of new stock buyback program. Meanwhile, Boeing lost ground after reporting a wider-than-expected loss.