NEW YORK (AP) — Wall Street tumbled Tuesday to its worst day in a month on worries about the strength of corporate profits and the economy following some mixed reports.
The S&P 500 fell 1.6% to break out of a weekslong lull. The Dow Jones Industrial Average dropped nearly 345 points, or 1%, while the Nasdaq composite sank 2%.
First Republic Bank had the biggest loss in the S&P 500 by far, and its stock nearly halved after it said customers withdrew more than $100 billion during the first three months of the year. That doesn’t include $30 billion in deposits that big banks plugged in to build faith in their rival after the second- and third-largest U.S. bank failures in history shook confidence.
The size of the drop in deposits renewed worries about the U.S. banking system and the risk of an economy-sapping pullback in lending. That overshadowed First Republic’s beating analysts’ expectations for earnings, and its stock plunged 49.4%.
The majority of companies so far this reporting season have been topping expectations, but the bar was set considerably low. Analysts are forecasting the worst drop in S&P 500 earnings since the spring of 2020, when the pandemic froze the global economy. That’s why Wall Street is focused just as much, if not more, on what companies say about their future prospects as they do about their past three months.
WHY UPS WAS LOWER
UPS fell 10% after it met profit forecasts but said it made less in revenue than expected. It also said its revenue for the full year will likely come at the low end of its prior forecast, citing a challenging economy and other factors.
Danaher was another big weight on the market, falling 8.8% despite reporting better earnings and revenue than expected. Analysts pointed to its trimming back its forecast for a key revenue measure over the course of the year.
On the winning side, PepsiCo rose 2.3% after beating profit expectations. Homebuilder PulteGroup rose 1.7% after also topping forecasts.
TECH EARNINGS
The heart of earnings reporting season is approaching, and more heavy hitters arrived after trading closed for the day.
Microsoft and Google’s parent company, Alphabet, both rose in afterhours trading after reporting profits above expectations. Because they’re two of the biggest companies on Wall Street by market value, their stock movements carry extra weight on the S&P 500 and other market indexes.
Broad stock indexes had been making only modest moves so far this earnings reporting season. The S&P 500 barely budged last week and ticked up just 0.1% on Monday. But volatility strategists at Barclays said the calm was unlikely to last for the long term.
The economy is under stress from high interest rates meant to get inflation under control. High rates can stifle inflation, but only by putting the brakes on the entire economy and hurting investment prices. Big chunks of the economy outside the job market have already begun to slow or contract.
With so much uncertainty about whether inflation can return to the Federal Reserve’s target without causing a recession, “we remain skeptical that markets are out of the woods,” Barclays strategists led by Stefano Pascale said in a report. They also pointed to “the risk of something breaking” in the financial system because of high rates.
ECONOMY WORRIES
A report on Tuesday showed that confidence among consumers fell more sharply in April than expected, down to its lowest level since July. That’s a discouraging signal when consumer spending makes up the biggest part of the U.S. economy.
A separate report was more encouraging, saying sales of new homes rose by more than expected. The housing industry has been under pressure because higher mortgage rates are squeezing buyers.
On Thursday, the U.S. will give its first estimate of how much the economy grew during the first three months of the year. Economists expect to see growth cooled to a 1.9% annual rate, down from 2.6% at the end of 2022.
Much of the slowdown is due to the Fed’s barrage of hikes to interest rates over the last year. The Federal Reserve meets next week, and much of Wall Street expects it to raise interest rates at least one more time before pausing.
Beyond higher interest rates, Wall Street is also worried that the struggles of the U.S. banking industry could tighten the brakes even further on the economy. First Republic said its deposits have stabilized since late March, but it’s still working to cut expenses. If it and other banks pull back on lending, it could lead to lower growth across the economy.
All told, the S&P 500 fell 65.41 points to 4,071.63. The Dow dropped 344.57 to 33,530.83, and the Nasdaq fell 238.05 to 11,799.16.
In the bond market, the yield on the 10-year Treasury fell to 3.39% from 3.50% late Monday. It helps set rates for mortgages and other important loans.
The two-year yield, which moves more on expectations for Fed action, fell to 3.95% from 4.11%.
In markets overseas, stock indexes closed mostly lower in Europe and were mixed across Asia overnight.
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AP Business Writers Joe McDonald and Matt Ott contributed.
OTTAWA – The parliamentary budget officer says the federal government likely failed to keep its deficit below its promised $40 billion cap in the last fiscal year.
However the PBO also projects in its latest economic and fiscal outlook today that weak economic growth this year will begin to rebound in 2025.
The budget watchdog estimates in its report that the federal government posted a $46.8 billion deficit for the 2023-24 fiscal year.
Finance Minister Chrystia Freeland pledged a year ago to keep the deficit capped at $40 billion and in her spring budget said the deficit for 2023-24 stayed in line with that promise.
The final tally of the last year’s deficit will be confirmed when the government publishes its annual public accounts report this fall.
The PBO says economic growth will remain tepid this year but will rebound in 2025 as the Bank of Canada’s interest rate cuts stimulate spending and business investment.
This report by The Canadian Press was first published Oct. 17, 2024.
OTTAWA – Statistics Canada says the level of food insecurity increased in 2022 as inflation hit peak levels.
In a report using data from the Canadian community health survey, the agency says 15.6 per cent of households experienced some level of food insecurity in 2022 after being relatively stable from 2017 to 2021.
The reading was up from 9.6 per cent in 2017 and 11.6 per cent in 2018.
Statistics Canada says the prevalence of household food insecurity was slightly lower and stable during the pandemic years as it fell to 8.5 per cent in the fall of 2020 and 9.1 per cent in 2021.
In addition to an increase in the prevalence of food insecurity in 2022, the agency says there was an increase in the severity as more households reported moderate or severe food insecurity.
It also noted an increase in the number of Canadians living in moderately or severely food insecure households was also seen in the Canadian income survey data collected in the first half of 2023.
This report by The Canadian Press was first published Oct 16, 2024.
OTTAWA – Statistics Canada says manufacturing sales in August fell to their lowest level since January 2022 as sales in the primary metal and petroleum and coal product subsectors fell.
The agency says manufacturing sales fell 1.3 per cent to $69.4 billion in August, after rising 1.1 per cent in July.
The drop came as sales in the primary metal subsector dropped 6.4 per cent to $5.3 billion in August, on lower prices and lower volumes.
Sales in the petroleum and coal product subsector fell 3.7 per cent to $7.8 billion in August on lower prices.
Meanwhile, sales of aerospace products and parts rose 7.3 per cent to $2.7 billion in August and wood product sales increased 3.8 per cent to $3.1 billion.
Overall manufacturing sales in constant dollars fell 0.8 per cent in August.
This report by The Canadian Press was first published Oct. 16, 2024.
