Wall St struggles as losses in Abbott counter Netflix’s gains

  • 10-year Treasury yields at highest level since July 2008
  • Netflix jumps after reversing customer losses
  • Tesla results for the third quarter are expected
  • Procter & Gamble, Travelers report positive results
  • PHLX Housing Index falls 3% on weak US housing data

Oct 19 (Reuters) – Wall Street’s main indices struggled for gains on Wednesday as weakness in Abbott shares offset Netflix’s gains and investors were puzzled by ongoing earnings momentum.

Abbott Laboratories (ABT.N) tumbled 8.08% after the company reported lower-than-expected growth in international medical device sales, hit by a strong dollar and supply concerns in China.

Netflix (NFLX.O), on the other hand, rose 13.84% after adding 2.4 million new subscribers worldwide in the third quarter, more than double the consensus forecast, and expecting to add 4.5 million new subscribers by year-end.

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A surge in Treasury yields to 14-year highs amid a sharp sell-off in US Treasuries on expectations of larger rate hikes also added to concerns for risk assets.

Housing starts, a measure of new housing construction, fell 8.1% in September, the latest sign the economy is slowing as it has been hit by the US Federal Reserve’s aggressive monetary tightening and rising inflation.

The PHLX Housing Index (.HGX) fell 3.70%, adding even more pain to stock markets trying to break out of month-long declines, with the three main indices remaining deep in bear market territory.

While some indicators of stock market health showed that the recent rally could be the start of a sustained move higher, many investors are awaiting signs of a slowdown in inflation, well above the Federal Reserve’s target.

“We are in a bear market right now and the trend is lower prices and the main reason is that we have high inflation and there are some signs that it may not have peaked yet,” said Rusty Vanneman, Chief Investment Strategist at Orion Advisor Solutions.

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The US Federal Reserve is expected to raise interest rates by 75 basis points in November for the fourth time in a row this year.

Analysts also said the Fed would not ease its aggressive stance until there is a visible impact on what has been a resilient US jobs market.

At 12:19 p.m. ET, the Dow Jones Industrial Average (.DJI) was down 47.36 points, or 0.16%, to 30,476.44, the S&P 500 (.SPX) was down 20.32 points, or 0.55% 3,699.66 and the Nasdaq Composite (.IXIC) fell 68.71 points, or 0.64%, to 10,703.69.

Dow constituents Procter & Gamble Co and Travelers Companies Inc (TRV.N) rose 2.3% and 3.0%, respectively, after the companies posted better-than-expected quarterly earnings.

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Analysts have raised third-quarter earnings growth expectations for S&P 500 companies to 3% from 2.8%, according to Refinitiv data. But it’s still significantly lower than an 11.1% increase forecast in early July.

Tesla Inc (TSLA.O) gained 0.13% ahead of its after-bell gains, with the focus on any weakness in demand that is beginning to weigh on the auto industry.

At a 3.43-to-1 ratio on the NYSE and a 2.64-to-1 ratio on the Nasdaq, declining issues outweighed the movers.

The S&P index posted two new 52-week highs and seven new lows, while the Nasdaq posted 28 new highs and 144 new lows.

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Reporting by Ankika Biswas and Shreyashi Sanyal in Bengaluru; Edited by Sriraj Kalluvila and Arun Koyyur

Our standards: The Thomson Reuters Trust Principles.

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