Market rout sends the Dow and S&P 500 into the red for the year
Stocks tumbled Wednesday, sending the Dow and S&P into the red for the year.
The S&P 500 (^GSPC) dropped 3.09%, or 84.59 points, to close at 2,656.10. The index started the year at 2,673.61. The Dow (^DJI) fell 2.41%, or 608.01 points, to close at 24,583.42. The 30-stock index started the year at 24,719.22.
The Nasdaq (^IXIC) plunged 4.43%, or 329.14 points. However, the tech-heavy index is still up 2.9% for the year.
The rout in equity trading extends what’s been a rough month for the market. The S&P is now down 9.68% from its Sept. 21 high of 2940.91.
“Over the past few weeks, it seems the overall narrative around equity markets has incrementally turned half-empty, as the combination of Fed hawkishness, trade tensions, midterm anxiety (Dems taking House), tariffs, political troubles, rising interest rates, weakening technicals and excess risk-on have shifted the ‘midpoint’ of consensus to late-cycle/bear market fears,” Fundstrat Global Advisors’ Tom Lee said in a note to clients on Wednesday. “It is a long list and enough to turn the ‘wall of worry’ (which markets climb) into a mountain of doubt.”
However, Lee also sees a number of signals in the fixed income and derivatives markets that tell him the worst may be over.
“We strongly reiterate our view that this sell-off is ending, not starting,” he said. “[H]ence, we are buying this dip.”
Lee’s not alone with this sentiment.
“We think the market is currently oversold on fears of trade, the euro, rising rates and uncertainty over midterm elections,” Argus Research’s John Eade said to Yahoo Finance. “How oversold? The VIX (^VIX) has more than doubled in the past month. This has happened multiple times during the bull market — each time, it has been a buying signal.”
“There are a lot of negative factors that are likely to be resolved and a lot of positive factors that are likely to kick in,” Commonwealth Financial Network’s Brad McMillan said.
Eade and McMillon see the S&P closing at 3,000 by year end. Lee sees the index hitting 3,025.
ECONOMY: New home sales plummet to lowest rate in nearly two years
New-home sales declined at a faster-than-expected pace in September to their lowest levels since December 2016. Sales of new single-family houses fell 5.5% month-over-month to a seasonally adjusted rate of 553,000, according to a release Wednesday from the Commerce Department. Consensus estimates among economists polled by Bloomberg anticipated a decline of just 0.6% month-over-month. The median sales price decreased 3.5% year-over-year to $320,000. Home supplies at current sales rates rose to 7.1 months, or the highest level since March 2011, from 6.5 months.
“Hurricane Florence was part to blame for the continued leveling of home sales, but the slowdown in sales was mostly due to deteriorating affordability. Mortgage rates recently climbed to a seven year high, and are expected to continue rising into 2019,” said Yun Cohen, an analyst with the National Association of Federally-Insured Credit Unions. “While demand for housing remains solid, it is starting to wane in response. A recent Freddie Mac survey shows that a growing share of renters’ view renting as more affordable than owning while fewer consumers plan to buy a home.”
The services purchasing managers’ index in the US registered at a seasonally adjusted rate of 54.7 for the month of October, versus 53.5 last month, representing a three-month high. IHS Markit’s reading for US manufacturing PMI came in at 55.9, exceeding economist expectations of 55.3, according to data compiled by Bloomberg.
“The flash PMI surveys indicate that the pace of economic growth gained momentum again in October after having been subdued mainly by adverse weather in September,” Chris Williamson, Chief Business Economist at IHS said in a statement. “The headline PMI is running at a level broadly consistent with the economy growing at an annualized rate of 2.5%, boding well for another robust quarter of growth.”
STOCKS: Boeing beats estimates, AT&T misses on EPS
Shares of The Boeing Company (BA) rose 1.35%, trading at $354.79 per share Wednesday after the company raised its full-year 2018 guidance for earnings per share and revenue. The company now anticipates EPS of between $14.90 to $15.10, from its previous guidance of $14.30 to $14.50 for the year. Revenue guidance increased $1 billion to between $98 billion and $100 billion. Boeing delivered core earnings of $3.58 per share on revenue of $25.1 billion for the quarter, exceeding analyst expectations of earnings of $3.47 per share on revenue of $23.91, according to data compiled by Bloomberg.
AT&T (T) reported mixed results in the company’s first full quarter following the completion of its acquisition of Time Warner in June. The telecommunications company reported adjusted earnings of 90 cents per share, falling short of average analyst expectations of earnings of 94 cents per share. Quarterly revenue came in at $45.7 billion, slightly beating average expectations of $45.63 million, according to data compiled by Bloomberg. WarnerMedia, formerly known as Time Warner, was a bright spot in the report, with the unit garnering revenue of $8.2 billion, or an increase of 6.5% from the year prior. AT&T’s stock fell 8.09% to $30.35 per share as of market close Wednesday.
Shares of Restaurant Brands (QSR), the parent company to Burger King, Tim Hortons and Popeyes, slipped after the company missed on earnings per share for the quarter and posted tepid same-store sales. The company reported EPS of 63 cents versus Wall street’s estimate of 65 cents. Same-store sales, a key metric for restaurant companies, grew at just 1% for Burger King, a main segment for the company. This compares to a pace of 3.6% in same-store sales for the year-ago quarter. Shares of Restaurant Brands fell 1.04% to $56.22 each at the end of trading Wednesday.
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Emily McCormick is a reporter for Yahoo Finance. Follow her on Twitter: @emily_mcck
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