U.S. stocks traded lower Thursday after renewed worries about a U.S. - China trade deal, more evidence of a slowdown in manufacturing, and mixed corporate earnings, despite an interest rate cut by the Federal Reserve Wednesday.
The weaker tone comes a day after the S&P 500 scored a record close after the Federal Reserve on Wednesday cut interest rates for the third time this year, while also signaling that it would pause before making any further moves on monetary policy.
How are major indexes performing?
The Dow Jones Industrial Average DJIA, -0.90% fell 173 points, or 0.6%, at 27,018, while the S&P 500 index SPX, -0.68% declined 13 points, or 0.4%, to trade at 3,034. The Nasdaq Composite Index COMP, -0.48% fell 17 points, or 0.2%, at 8,287.
The S&P 500 ending the day up 9.88 points, or 0.3%, at 3,046.77 — a record close. The Dow Jones Industrial Average rose 115.27 points, or 0.4%, to close at 27,186.69, leaving it 0.6% away from its record close set on July 15. The Nasdaq Composite finished at 8,303.98, up 27.12 points, or 0.3% — 0.3% off its record finish from July 26.
The Dow Jones Industrial Average, S&P 500 and Nasdaq each were tracking higher for the month ahead of the final day of October, Halloween.
What’s driving the market?
Chinese officials are expressing doubts about their ability to reach a comprehensive, long-term trade deal with the U.S. despite progress toward signing a “phase one” agreement, Bloomberg reported Thursday. However, early Thursday President Trump took to Twitter to assuage fears that the cancellation of the Asia-Pacific Economic Cooperation meeting scheduled for next month, where the president and China’s Xi Jinping were expected to agree to a “phase 1” trade deal would impinge on progress in the trade talks.
In U.S. economic data, there was more evidence of a slowdown in manufacturing with the Chicago purchasing-managers index (PMI) falling to 43.2 in October from 47.1 in September, below the 48.3 consensus expectation, according to Econoday.
The poor reading can be blamed in part to the recently-ended worker strike at General Motors, argued Joseph Brusuelas, chief economist at RSM, in a tweet. “But make no mistake about it the domestic manufacturing sector is in recession for reasons beyond the strike,” he wrote.
The number of Americans newly applying for jobless benefits ticked up by 5,000 to 218,000 in the week ended Oct. 26, though remained near historic lows. Compensation costs for American workers rose 0.7% in the third quarter, the Labor Department said Thursday morning. Year-over-year, costs rose 2.8%, a slight increase from the 2.7% rise in June.
However, Americans increased spending in September for the seventh consecutive month, up 0.2%, while personal income rose 0.3%. Core inflation rose 1.7% last month, according to the Fed’s preferred PCE measure, down from 1.8% in August, and below the central bank’s 2% target.
On Wednesday, the Fed, as expected, cut its benchmark interest rate for the third time in as many meetings on Wednesday, but signaled it may pause before making further changes to its monetary policy settings to see whether those steps would be enough to sustain the economic expansion.
“The takeaway for investors was that while the Fed wants to pause, it will still cut rates if anything adverse happens, whereas it won’t raise them even if the economy picks up steam — which was enough to propel the likes of the S&P 500 to new record highs,” said Marios Hadjikyriacos, investment analyst at XM, in a note.
On the corporate earnings front, reports from Apple Inc. AAPL, +1.76% and Facebook Inc. FB, +2.11% released late Wednesday were well received. Facebook shares were up 2.5% after announcing results that soundly beat earnings forecasts and topped revenue expectations.
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Apple reported profits in the third quarter dipped by 3%, which beat analysts’ expectations, even as iPhone sales fell by 9%, but the stock was up nearly 2% in early trade as the phone maker delivered an upbeat holiday forecast. The company also bought back $78.9 billion worth of its stock in the fourth quarter, up from $17 billion in the third quarter.
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Shares of Starbucks Corp. SBUX, -0.77% fell 0.3% after the coffee chain reported fiscal fourth-quarter results that saw revenue and same-store sales boosted following the summer rollout of its Nitro Cold Brew beverage.
The stream continued Thursday, with results ahead of the opening bell from a number of heavyweights, including DuPont de Nemours, Inc. DD, +1.31%, shares of which rose 1.6% after the materials company reported a 26% decline in profit in the third quarter, less than analysts were expecting.
Bristol-Myers Squibb Co. BMY, +1.71% shares gained 1.9% after the company beat earnings estimates but lowered its full-year per-share earnings guidance.
Kraft Heinz Co. KHC, +12.88% shares rallied 12.4% in early trade Thursday after the food company reported third-quarter earnings and sales that beat expectations.
Coffee-and-donut chain Dunkin Brands Group Inc. DNKN, +5.41% said profit rose for its third quarter as revenue increased from a year earlier. The company’s stock rose 5.7% Thursday.
Shares of Marathon Petroleum Corp. MPC, -3.31% were down 3.9% after the energy company reported profit that beat expectations but missed on revenue, while announcing plans to spin off its Speedway business and that its long-time chief executive plans to retire.
Shares of Twitter Inc. TWTR, -0.69% were also in the spotlight Thursday, off 1%, a day after the social media company said it would ban most political advertising from its service.
Fiat Chrysler Automobiles N.V. FCAU, +2.90% FCA, +8.72% shares jumped 3.7% in Italy while Peugeot S.A. UG, -12.86% shares fell more than 11% in Paris after the two companies said they would combine in a 50-50 merger.
How are other markets trading?
The yield on the 10-year U.S. Treasury note TMUBMUSD10Y, -4.19% fell 10 basis points to 1.694%.
In commodities markets, the price of West Texas Intermediate crude oil CLZ19, -1.82% for December delivery fell $1.24, or 2.3%, to $53.82 a barrel on the New York Mercantile Exchange. The value of an ounce of gold for December delivery GCZ19, +1.18% rose $15.50, or 1%, to $1,512.30. The U.S. dollar, meanwhile, edged down 0.4%, according to the dollar index. DXY, -0.33%
In Asia overnight stocks traded mixed, with the China CSI 300 000300, -0.11% falling 0.1%, the Nikkei 225 NIK, +0.37% adding 0.4% and Hong Kong’s Hang Seng index HSI, +0.90% rising 0.9%. In Europe stocks were mostly lower, with the Stoxx Europe 600 SXXP, -0.47% declining 0.4%.