Wall Street struggles for footing on cost worries, rising yields

26 April, 2018, 12:51 | Author: Shannon Aguilar
  • The higher bond yield has overshadowed some solid first-quarter earnings reports

Stocks moved broadly higher in early trading Tuesday as a handful of solid company earnings reports put investors in a buying mood.

The fall in the Nasdaq composite index was 1.7% to 7007.35 points, with shares of Facebook, Amazon, Alphabet and Netflix falling by more than 3.5%. The S&P 500 is down 1.5 percent year-to-date.

Tuesday's losses reflect a growing belief among investors that the forces behind last year's rampant stock gains would continue to fade.

The rising yield reflects higher expectations for inflation and economic growth.

US crude oil futures settled 1.4 per cent lower at $67.70 a barrel as concerns faded over the possibility that the United States might reinstate sanctions against Iran.

"While the market has focused on the psychological resistance level of 3% yields on U.S. ten year bonds, investors should not anchor themselves too much in the recent past".

The Dow Jones industrial average was down 500 points in later afternoon trading.

Bradley Halverson, CFO of Caterpillar, the heavy equipment and machinery manufacturer, told market analysts earlier the the first financial quarter would be, "the high watermark of the year".

Benchmark U.S. crude oil rose 30 cents to $68.35 a barrel in electronic trading on the New York Mercantile Exchange.

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The rising bond rate could cause the Federal Reserve to tighten monetary policy more quickly and make it more expensive to borrow money for mortgages and auto loans, detracting from profit for major US companies. Analysts claim that the four-year high could spur some big investors to take money out of stock investments and put it into bonds citing continued inflation troubles.

The S&P 500 index lost 8 points, or 0.3 percent, to 2,626.

And before the end of trades, the stock went 0.3 percent down to the 1,073.81, closing lower 50-day in the second session in a row.

"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.

In small-caps, the Russell 2000 closed at 1,550.47 for a loss of -2.81 points or -0.18%.

Restaurant Brands International Inc rose 4.3 per cent to C$72.04 after the company reported first-quarter profit that topped estimates.

CURRENCIES: The dollar inched up to 108.86 yen from 108.84 yen. Brent crude, used to price worldwide oils, fell 1.1 percent to $73.86 per barrel in London. The euro rose to $1.2244 from $1.2205.

OVERSEAS: Germany's DAX lost 0.2 percent while the French CAC 40 added 0.1 percent and Britain's FTSE 100 rose 0.4 percent.

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