Stocks Down 425 As Tech Takes Hit; High 10-Year Treasury Yields
Apr 29 2018
The Dow opened slightly higher on Wednesday, boosted by Boeing's 3.4 per cent jump after strong results, while the Nasdaq and S&P 500 were little changed as U.S. bond yields climbed above the 3 per cent level.
The Toronto Stock Exchange's S&P/TSX composite index closed down 75.06 points, or 0.48 per cent, at 15,477.00. The Nasdaq composite dipped 3.61 points, or 0.1 percent, to 7,003.74. Moves for the equity markets came against the backdrop of rising borrowing costs, which were causing a reassessment of stock valuations.
INDUSTRIAL WEAKNESS: Caterpillar executives told analysts on a conference call in the late morning that they don't expect the company to report a larger per-share profit for the rest of the year. This was despite Twitter posting a set of upbeat profit results. On Wednesday Goodyear Tire & Rubber said higher raw materials costs and weaker demand hurt its business in the first quarter. Oil prices have also jumped and investors are anxious that new tariffs will also drive up costs and affect company earnings in the months to come. Industrial and basic materials companies and technology firms are taking some of the worst losses. The company reported better-than-expected first-quarter earnings and boosted its full-year sales and profit forecast but did not raise its 2018 cash-flow projections.
Stocks shot up at the end of 2017 and the start of 2018 as investors bet that the corporate tax overhaul would lead to bigger profits for American companies and greater economic growth.
COMMODITIES: Benchmark U.S. crude oil rose 8 cents to $67.78 in NY. The 10-year yield traded at 2.43 percent at the beginning of the year.
"Fears of "peak earnings" are laughable considering that the average constituent in the S&P 500 has enjoyed year-over-year bottom line growth in excess of 20%", Klein wrote in a note.
The Dow Jones industrial average fell 97, or 0.4 percent, to 23,928.
Technology and industrial stocks weighed on the major indexes on Tuesday, with Alphabet Inc, Facebook Inc, 3M Co and Caterpillar Inc all falling more than 3.5 per cent.
The 10 year benchmark of Treasury yield traded at 3.02 percent after breaking above the rate of 3 percent for the first time on Tuesday since 2014. the rates which are moving higher is pushing the stocks lower with the Dow dropping by more than 400 points.
Gold rose 0.7 percent to $1,333 an ounce.
Declining issues outnumbered advancing ones on the NYSE by a 1.94-to-1 ratio; on Nasdaq, a 1.71-to-1 ratio favored decliners.
Japan's benchmark Nikkei 225 slipped 0.3 percent to 22,206.51 and Hong Kong's Hang Seng lost 0.8 percent to 30,378.89.