By Damian J. Troise and Alex Veiga
Stocks on Wall Street lost ground again Thursday, though the major indexes remained on pace for a weekly gain after a strong two-day rally earlier this week.
The S&P 500 fell 0.8%. Nearly three-fourths of the stocks in the benchmark index closed in the red, with retailers, banks and industrial companies among the biggest weights. The Dow Jones Industrial Average slipped 0.3% and the Nasdaq composite fell 0.6%. Small company stocks fell more than the broader market, pulling the Russell 2000 index 1.2% lower.
Treasury yields continued rising to multiyear highs, a trend that's helped push up rates on mortgages and other loans. The yield on the 10-year Treasury climbed to 4.23% from 4.14% late Wednesday and is at its highest level in 14 years. The yield on the two-year Treasury, which tends to track expectations for future Federal Reserve action, rose to 4.61% from 4.56%.
Corporate earnings remained a big focus for Wall Street all week as investors try to get a better picture of how companies are faring amid the hottest inflation in four decades and how they see the economy moving forward.
The results have been mixed so far. Several big companies released encouraging financial results, while others have disappointed investors with weak or worrisome warnings.
“Earnings growth estimates for the current quarter are coming in 3.6% higher than they were a year ago," said Bill Northey, senior investment director at U.S. Bank Wealth Management. “Just a matter of months ago, the expectations were for 10% earnings growth in the third quarter. So there has been a material downgrade to the level of expected earnings growth this year.”
IBM rose 4.7% after its third-quarter earnings and revenue topped analysts' forecasts. AT&T jumped 7.7% after also reporting strong results.
Tesla fell 6.6% after saying it will miss its target for vehicle deliveries this year. Union Pacific dropped 6.8% after the railroad operator predicted slower growth, suggesting that the economy may be slowing down. Rival CSX fell 3%. American Airlines fell 3.8% after reporting its latest results.
Allstate slumped 12.9% after giving investors a disappointing financial update.
All told, the S&P 500 fell 29.38 points to 3,665.78. The Dow lost 90.22 points to close at 30,333.59. The Nasdaq dropped 65.66 points to 10,614.84. The Russell 2000 fell 21.36 points, to 1,704.39.
Markets in Europe closed higher. British Prime Minister Liz Truss resigned following financial market turmoil caused by multiple policy U-turns.
Investors remain concerned about inflation and the potential for recessions throughout world. Wall Street is particularly worried about the Fed's ongoing plan to raise interest rates in order to slow economic growth and tame high prices. The U.S. economy is already showing signs of a slowdown and the Fed's plan risks stalling the economy and causing a recession.
The employment market has remained a strong area of the economy, along with consumer spending. The latest government data showed that the number of Americans applying for unemployment benefits fell last week and remains historically low.
The healthy jobs market has been a tricky sticking point for the broader economy. While positive, it also signals that the Fed will have to remain aggressive in raising interest rates. Fed officials have warned that the unemployment rate will likely have to rise as part of their fight against rising prices.
The central bank has raised its key interest rate to a range of 3% to 3.25%. A little more than six months ago, that rate was near zero. The rate increases have been putting pressure on other areas of the economy, including the housing market.
The sharp rate increases have pushed mortgage rates up to 15-year highs. Mortgage buyer Freddie Mac reported Thursday that the average on the key 30-year rate ticked up this week to 6.94% from 6.92% last week. Last year at this time, the rate was 3.09%.
Higher mortgage rates are helping stall a housing sector that has been hot for years. The National Association of Realtors said Thursday that sales of previously occupied U.S. homes fell in September for the eighth month in a row.
Homebuilders fell broadly following the latest housing and mortgage rates reports. PulteGroup fell 1.5%.
Elaine Kurtenbach and Matt Ott contributed to this report.