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Disappointing Earnings News Leads To Sell-Off On Wall Street - U.S. Commentary


Following yesterday's attempted recovery from an early sell-off, stocks showed a substantial move back to the downside during trading on Wednesday. The Dow dropped to its lowest closing level in over three-months, while the Nasdaq and the S&P 500 tumbled to five-month closing lows.

The major averages saw further downside going into the close, ending the day just off their lows of the session. The Dow plunged 608.01 points or 2.4 percent to 24,583.42, the Nasdaq nosedived 329.14 points or 4.4 percent to 7,108.40 and the S&P 500 plummeted 84.59 points or 3.1 percent to 2,656.10.

The renewed selling pressure on Wall Street largely reflected amid another negative reaction to the latest batch of earnings news from several big-name companies.

Shares of AT&T (T) moved substantially lower after the telecom giant reported third quarter earnings that came in below analyst estimates.

Delivery giant UPS (UPS) also fell sharply after reporting third quarter earnings that matched estimates but weaker than expected revenues.

On the other hand, shares of Boeing (BA) moved to the upside after the aerospace giant reported better than expected third quarter results and raised its full-year guidance.

Negative sentiment was also generated by the release of a report from the Commerce Department showing a steep drop in new home sales in the month of September.

The report said new home sales plunged by 5.5 percent to an annual rate of 553,000 from the revised August rate of 585,000.

Economists had expected new home sales to edge down to a rate of 625,000 from the 629,000 originally reported for the previous month.

With the substantial decrease, new home sales fell to their lowest level since hitting a rate of 546,000 in December of 2016.

News explosive devices were sent to several prominent Democratic figures, including former President Barack Obama and Hillary Clinton, as well as CNN may also have led to some uneasiness on Wall Street.

Sector News

Biotechnology stocks turned in some of the market's worst performances on the day, dragging the NYSE Arca Biotechnology Index down by 7.2 percent to its lowest closing level in well over five months.

Within the biotech sector, Alexion Pharmaceuticals (ALXN) posted a steep loss despite reporting better than expected third quarter earnings and raising its full-year guidance.

Substantial weakness was also visible among semiconductor stocks, as reflected by the 6.6 percent slump by the Philadelphia Semiconductor Index. The index tumbled to its lowest closing level in a year.

Texas Instruments (TXN) led the semiconductor sector lower after the chipmaker reported weaker than expected third quarter revenues and provided disappointing fourth quarter guidance.

Energy stocks also saw considerable weakness despite an increase by the price of crude oil, moving notably lower along steel, software, and computer hardware stocks.

Meanwhile, interest rate-sensitive utilities stocks were among the few groups to buck the downtrend, resulting in a 2.3 percent jump by the Dow Jones Utility Average. The average reached a ten-month closing high.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region turned in a mixed performance during trading on Wednesday. Japan's Nikkei 225 Index rose by 0.4 percent, while Hong Kong's Hang Seng Index fell by 0.4 percent.

The major European markets also ended the day mixed. While the U.K.'s FTSE 100 Index inched up by 0.1 percent, the French CAC 40 Index dipped by 0.3 percent and the German DAX Index slid by 0.7 percent.

In the bond market, treasuries showed a notable move to the upside amid the weakness on Wall Street. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, dropped by 4.2 basis points to 3.124 percent.

Looking Ahead

Earnings news is likely to continue to attract attention on Thursday, with Microsoft (MSFT), Ford (F), Tesla (TSLA), Advanced Micro Devices (AMD), and Visa (V) among the companies releasing their quarterly results after the close of today's trading.

American Airlines (AAL), Bristol-Myers Squibb (BMY), ConocoPhillips (COP), Hershey (HSY), Merck (MRK), and Twitter (TWTR) are also among the companies due to report their results before the start of trading on Thursday.

Trading may also be impacted by reaction to reports on weekly jobless claims, durable goods orders and pending home sales.

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