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Wall Street ends lower as Fed worries outweigh earnings
NEW YORK, Oct 20 (Reuters) – U.S. stocks closed lower on Thursday as data on the labor market and comments from a U.S. Federal Reserve official reinforced expectations the central bank will be aggressive in hiking interest rates outweighed a flurry of solid corporate earnings.
Stocks initially rose early in the session, boosted by gains in names such as IBM (IBM.N), up 4.73% after the IT services company beat quarterly earnings estimates on Wednesday and said it expects to exceed full-year revenue growth targets. AT&T Inc (T.N) surged 7.72% upon raising its annual profit forecast.
But stocks were unable to hold their gains as strong weekly jobless claims and comments from Federal Reserve Bank of Philadelphia President Patrick Harker bolstered concerns about the Fed hiking rates and potentially tilting the economy into a recession.
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Harker said the Fed is not done raising its short-term rate target as high inflation persists, helping to push the yield on the 10-year U.S. Treasury note to its highest level since June 2008 at 4.239%.
“It’s interest rates that are driving equity volatility, that is the way we have been looking at things all year, that is kind of the precursor of seeing things calm down in the equity space and feeling better about adding risk there is seeing volatility decline in interest rates,” said Zachary Hill, head of portfolio management at Horizon Investments in Charlotte, North Carolina.
“I’m not sure we are going to be able to see that pause that a few Fed members have been pointing to and certainly a few market participants have been kind of latching on to.”
The Dow Jones Industrial Average (.DJI) fell 90.22 points, or 0.3%, to 30,333.59, the S&P 500 (.SPX) lost 29.38 points, or 0.80%, to 3,665.78 and the Nasdaq Composite (.IXIC) dropped 65.66 points, or 0.61%, to 10,614.84.
The New York Stock Exchange building is seen from Broad Street in Lower Manhattan in New York, January 20, 2016. REUTERS/Mike Segar
Better-than-expected results thus far has pushed earnings growth expectations for third-quarter for S&P 500 companies to 3.1% from a 2.8% increase earlier in the week, but still well below the 11.1% increase that was forecast at the start of July.
Tesla Inc (TSLA.O) slumped 6.65% as the electric-vehicle maker flagged persistent logistics challenges, with fourth-quarter deliveries growing by less than the aimed 50%.
Stocks have been under pressure this year as concerns about the impact of the Fed’s aggressive path of interest rate hikes on corporate earnings and the overall economy have mounted as the central bank tries to quell stubbornly high inflation.
Other data showed sales of existing homes fell for an eight straight month, while another reading showed factory activity in the Federal Reserve Bank of Philadelphia’s district contracted again in October.
The U.S. central bank is widely expected to announce a fourth straight 75 basis-point hike at its November meeting, with an outside chance of a full percentage point increase.
Volume on U.S. exchanges was 11.37 billion shares, compared with the 11.62 billion average for the full session over the last 20 trading days.
Declining issues outnumbered advancing ones on the NYSE by a 2.12-to-1 ratio; on Nasdaq, a 1.34-to-1 ratio favored decliners.
The S&P 500 posted 3 new 52-week highs and 28 new lows; the Nasdaq Composite recorded 53 new highs and 239 new lows.
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Reporting by Chuck Mikolajczak; Editing by Aurora Ellis
Our Standards: The Thomson Reuters Trust Principles.
S&P, Nasdaq rebound as strong earnings outweigh inflation fears By Reuters
© Reuters. FILE PHOTO: People are seen on Wall Street outside the New York Stock Exchange (NYSE) in New York City, U.S., March 19, 2021. REUTERS/Brendan McDermid/File Photo
By Ambar Warrick and David French
NEW YORK (Reuters) – The and Nasdaq remained positive into early afternoon trading on a topsy-turvy Thursday on Wall Street, with investors taking cues from upbeat retail and technology earnings despite hawkish inflation comments from a Federal Reserve policymaker.
By contrast, the Dow continued to play the laggard, threatening to wipe out November gains as it headed for its third decline this week. Cisco Systems Inc (NASDAQ:) weighed the heaviest on the benchmark.
Inflation remains front and center for investors, and stock markets initially slipped after New York Federal Reserve Bank President John Williams said inflation is becoming more broad-based and that expectations for future price increases are rising.
“Investors are worried that the Fed is behind the curve, that they’ll have to say that (inflation) is no longer transitory,” said Sam Stovall, chief investment strategist of CFRA Research in New York.
Both the S&P and Nasdaq had rebounded by late morning though, with the latter supported by Nvidia (NASDAQ:). The chipmaker jumped to a record high after beating quarterly estimates and forecasting strong fourth-quarter revenue, before giving up some of its gains. It was last up 7.9%.
The performance helped the Philadelphia semiconductor index hit a fresh record high, before it too eased a touch to advance 1.2%.
The S&P consumer discretionary sector led gains among its peers, rising 1% as positive retail earnings from Macy’s and Kohl’s joined upbeat reports from Walmart (NYSE:) Inc and Target Corp (NYSE:) earlier this week.
Macy’s Inc (NYSE:) surged 20.8% after it raised its annual earnings guidance and flagged plans for a potential spinoff of its ecommerce division.
Peer Kohl’s Corp (NYSE:) rose 8% after raising its forecast.
The S&P 500 retailing index has broken its intraday record every session this week, as investors viewed the earnings as a signal of robust consumer demand that has persevered through rising inflation, and that retailers were set for a strong holiday season.
“The consumer is stronger than expected; it’s good news for the country as a whole. A stronger consumer is a reflection of a strong economic bounce,” said Mike Zigmont, head of research and trading at Harvest Volatility Management in New York.
Still, concerns over further increases in price pressure, along with uncertainty over the Fed’s plans for tightening have kept Wall Street muted this week.
Investors also hoped for more fiscal spending, after Speaker Nancy Pelosi said the House of Representatives could vote on President Joe Biden’s $1.75 trillion “Build Back Better” legislation by as soon as Thursday.
The Dow Jones lagged its peers on steep losses in network gear maker Cisco, which tumbled 7.2% after it forecast current-quarter revenue below expectations due to supply chain shortages and delays.
Visa Inc (NYSE:) fell 0.7%, declining for a second day and heading for its worst finish since February after news that Amazon.com Inc (NASDAQ:) may pare back its relationship with the payments company.
By 1:49 p.m. ET, the fell 30.94 points, or 0.09%, to 35,900.11, the S&P 500 gained 13.98 points, or 0.30%, to 4,702.65 and the added 37.27 points, or 0.23%, to 15,958.84.
Among other stocks, Boeing (NYSE:) Co rose 0.3% after Virgin Australia said it would add seven more 737 NG planes to its fleet, and as J.P. Morgan upgraded the planemaker’s stock to “overweight” from “neutral”.
Benefits outweigh risks in most scenarios, FDA review says of Pfizer vaccine for children
A review by the Food and Drug Administration (FDA) indicated on Friday that the Pfizer-BioNTech’s COVID-19 vaccine provided more benefits to children in most scenarios than possible risk, the latest sign that health agencies could give the green light on a vaccine for children as young as 5 years old in the coming weeks, The Washington Post reported.
An FDA review found that a two-dose regimen of the Pfizer vaccine for children provided more benefits to children than risks in three of four scenarios that the agency considered.
The FDA noted that there could be the risk of more pediatric hospitalizations due to myocarditis stemming from the vaccine than COVID-19 in the scenarios of lower levels of COVID-19 transmission, but noted “the overall benefits of the vaccine may still outweigh the risks under this lowest incidence scenario,” according to the newspaper.
Earlier on Friday, Pfizer released data from its study which indicated that the vaccine was 91 percent effective for children between the ages of 5 to 11 years old. Pfizer noted that when children were given two 10-microgram doses and spaced out between three weeks — a smaller dosage and timeline than for other age groups — the children indicated equal levels of protection against the delta variant and initial COVID-19 strain.
An FDA advisory panel meeting will convene next Tuesday to consider if younger children should be recommended for the Pfizer vaccine. The FDA’s review of Pfizer’s study indicates that it could be recommended favorably.
The Centers for Disease Control and Prevention (CDC) will weigh in once the FDA decides whether to accept the panel’s recommendation. It is anticipated that children could start receiving the Pfizer vaccine as soon as early November.
That news would be seen as welcome relief to some parents who are anxious to have their children vaccinated in time for the holidays. Pfizer’s vaccine is only approved for children as young as 12 years old, but an authorization from both the health agencies could extend that to most children if they recommend Pfizer’s vaccine for children favorably.
TSMC Shares Tumble As Margin Concerns Outweigh Strong Demand
(Bloomberg) — Taiwan Semiconductor Manufacturing Co. shares dropped the most in more than four months after its gross margins disappointed investors who had banked on the chipmaker to benefit from the ongoing chip shortage.
The stock sank 4.1% in Taipei trading Friday, snapping four days of gains. Gross margin for the second quarter was 50%, below the roughly 51% average predicted by analysts, in part because of the appreciation in the Taiwan dollar during the period. For the September quarter, TSMC forecast gross margin of 49.5% to 51.5%. Analysts from Morgan Stanley called the third-quarter guidance a “disappointment,” warning that gross margins could fall below 50% as early as next year.
TSMC, the world’s largest contract manufacturer, has faced increasing pressure to boost capacity to help alleviate a supply crunch that has plagued the automobile and other industries. The Taiwanese company earlier this year pledged to spend $100 billion over three years to build new fabs and invest in more advanced nodes, as rivals like Intel Corp. and Samsung Electronics Co. seek to catch up.
TSMC executives on Thursday also revealed for the first time that the chipmaker was weighing plans for a fabrication plant in Japan. And Intel is exploring a deal to acquire semiconductor manufacturer GlobalFoundries Inc., the Wall Street Journal reported, citing people familiar with the matter.
“We still believe at some point in 2022 and 2023, TSMC’s gross margin will fall below 50% given the steep increasein depreciation cost, while the company doesn’t seem to be demonstrating pricing power,” Morgan Stanley analysts led by Charlie Chan wrote in a note after the earnings. “Or, simply as indicated, Moore’s Law is just getting too expensive while TSMC will have to suffer margin erosion to keep the chip scaling trend going.”
The disappointing margins overshadowed a raised sales projection based on its central role in alleviating a global chip crunch that’s plaguing automakers and device manufacturers. TSMC said sales this year will rise more than 20%, a slight increase from a previous forecast for 20% growth in full-year sales. Revenue in the current quarter may rise to between $14.6 billion and $14.9 billion, in line with the $14.7 billion average of analyst estimates.
Some analysts said TSMC had failed to meet outsized expectations. The results “beat our conservative estimates but missed consensus” due to “excessive” expectations for gross margins, Needham wrote in a note Thursday.
Read more: TSMC Raises Sales Outlook, Affirming Global Chip Kingpin Role
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Being fit doesn’t outweigh the dangers of obesity, new study suggests
New research has just plunged a dagger through the core of the mentality that you can be “fat but fit.”
Physical activity does nothing to cancel the harmful effects of excess body weight on cardiovascular health, according to a bombshell study published Thursday in the European Journal of Preventive Cardiology, a journal of the European Society of Cardiology.
The findings contradict previous studies concluding that maintaining physical activity could lessen the effects of extra body weight on heart health.
“One cannot be ‘fat but healthy,’ ” said the study’s author, Alejandro Lucia, a professor of exercise physiology at the European University of Madrid.
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“One cannot be ‘fat but healthy,’ ” said the study’s author, Alejandro Lucia, a professor of exercise physiology at the European University of Madrid. “This was the first nationwide analysis to show that being regularly active is not likely to eliminate the detrimental health effects of excess body fat. Our findings refute the notion that a physically active lifestyle can completely negate the deleterious effects of overweight and obesity.”
Lucia cites previous research that suggested, in adults and children, a “fat-but-fit” lifestyle could be in similar cardiovascular heath to those who are “thin but unfit” — and adds that’s led people astray from the true priority.
“This has led to controversial proposals for health policies to [prioritize] physical activity and fitness above weight loss,” he said. “Our study sought to clarify the links between activity, body weight, and heart health.”
SKIPPING DINNER MIGHT LEAD TO WEIGHT GAIN, NEW STUDY SAYS
This study surveyed data from 527,662 working Spanish adults, all insured by a large occupational risk prevention company. Thirty-two percent of the participants were women; The average age was 42.
They were categorized by activity level and body weight — with some 42 percent classified as normal weight with a body mass index (BMI) of 20 to 24.9. Approximately 41 percent were overweight, with a BMI of 25 to 29.9, while 18 percent were considered obese, with a BMI of 30 or above. The majority of the study’s pool, more than 63 percent, were physically inactive. About 24 percent were regularly active and just more than 12 percent were considered insufficiently active.
The research team then examined the associations between BMI, level of physical activity, and high cholesterol, high blood pressure and diabetes — the three of which carry big risks for heart attack and stroke.
They found that across all BMI measurements, any physical activity was linked to a lower likelihood of diabetes, high cholesterol and high blood pressure when compared to no exercise at all.
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“This tells us that everyone, irrespective of their body weight, should be physically active to safeguard their health,” said Lucia.
So yes, being active is important. But size still matters.
Regardless of activity levels, the overweight and obese participants faced higher cardiovascular risks than those with normal body weight. When compared to inactive normal-weight adults, physically active obese people were still about twice as likely to have high cholesterol, four times more likely to have diabetes and five times more likely to have high blood pressure.
“Exercise does not seem to compensate for the negative effects of excess weight,” he added. “This finding was also observed overall in both men and women when they were [analyzed] separately.”
Lucia concluded that obesity and inactivity must both be combatted.
“It should be a joint battle,” he said. “Weight loss should remain a primary target for health policies together with promoting active lifestyles.”
However, the study makes no mention or recommendations for diet — and when it comes to an example of physical activity, Lucia said “walking 30 minutes per day is better than walking 15 minutes a day.”
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Sean Heffron, MD, a cardiologist at the Center for the Prevention of Cardiovascular Diseases at NYU Langone Health, underscored that obesity is a risk factor for cardiovascular disease — as is insufficient physical activity — but weight loss requires a two-part formula.
“Exercise in and of itself isn’t the kind of way to lose weight,” he said. “It’s complementary to having an ideal body weight,” but improving your diet is the other piece of the puzzle.
This content originally appeared in The New York Post.