U.S. stocks closed lower Thursday after renewed worries about a U.S. - China trade deal, more evidence of a slowdown in manufacturing, and mixed corporate earnings.
The weaker tone followed a record close for the S&P 500 after the Fed cut 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, -0.52% closed 140.46 points, or 0.5%, lower, at 27,046.23, while the S&P 500 index SPX, -0.30% declined 9.21 points, or 0.3%, to finish at 3,037.56. The Nasdaq Composite Index COMP, -0.14% fell 11.62 points, or 0.1%, to end at 8,292.36. All three indexes ended well off session lows.
The major indexes scored monthly gains, with Dow hanging on to a 0.5% October rise, while the S&P 500 rose 2% and the Nasdaq advanced 3.7%.
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 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 GM, -1.98%, 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 that reading 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.
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.
“Recent green shoots have many investors asking: is global growth bottoming?,” Bank of America Merrill Lynch economist Ethan Harris said. “This, in turn, helped trigger a mini risk-on trade in markets. Unfortunately, we think it is too early to call a turn. While there have been a few hopeful signs in recent releases, overall the data are still weakening.”
On Wednesday, the Fed cut its benchmark interest rate for the third time in as many meetings on Wednesday, as expected, 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.
On the corporate earnings front, reports from Apple Inc. AAPL, +2.26% and Facebook Inc. FB, +1.81% released late Wednesday were well received. Facebook shares were up 2.4% 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% 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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So far, two thirds of the S&P 500 have reported quarterly earnings and of those 75% posted better-than-expected results, FactSet data shows.
What companies are in focus?
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Shares of Starbucks Corp. SBUX, +0.44% rose 0.4% 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.
Shares of Marathon Petroleum Corp. MPC, -3.38% were down almost 3.4% 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 longtime chief executive plans to retire.
Twitter Inc. TWTR, +0.37% was in the spotlight Thursday, a day after the social media company said it would ban most political advertising from its service. Shares were higher Thursday but have lost over 27% in the past month.
Cannabis company Curaleaf CURLF, -8.25% saw its shares tumble after announcing plans to scale back a previously-announced acquisition.
Bristol-Myers Squibb Co. BMY, +0.88% shares gained 0.6% after the company beat earnings estimates but lowered its full-year per-share earnings guidance.
Kraft Heinz Co. KHC, +13.44% shares rallied 13.4% on Thursday after the food company reported third-quarter earnings and sales that beat expectations.
Coffee-and-donut chain Dunkin Brands Group Inc. DNKN, +6.27% said profit rose for its third quarter as revenue increased from a year earlier. The company’s stock rose 6.3%.
How are other markets trading?
The yield on the 10-year U.S. Treasury note TMUBMUSD10Y, +0.62% fell 10 basis points to 1.69%.
In commodities markets, the price of West Texas Intermediate crude oil CLZ19, +0.41% for December delivery fell $1.02 or 1.9%, to $54.04 a barrel on the New York Mercantile Exchange. The value of an ounce of gold for December delivery GCZ19, -0.18% rose $17.30 or 1.2%, to $1,514.00. The U.S. dollar, meanwhile, edged down 0.3%, according to the dollar index. DXY, -0.13%