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U.S. stocks extended losses at midday, building on a decline that came as investors reacted negatively to Federal Reserve minutes that were interpreted as slightly hawkish, as well as a tough day for Chinese equities, which sank to new four-year lows. How are benchmarks performing The Dow Jones Industrial Average
fell 334 points, or 1.3%, to 25,374, and those for the S&P 500 index
declined by 38 points to 2,771, a fall of 1.4%. Meanwhile the Nasdaq Composite Index
was down 143 points, or 1.9%, to 7500, in morning trading. On Wednesday, the Dow
finished the day down 91.74 points, or 0.4%, at 2706.88. The S&P 500
lost 0.71 point, or less than 0.1%, falling to 2,809.21, while the Nasdaq Composite Index
shed 2.79 points to close at 7,642.70. The three main benchmarks haven’t posted consecutive losses since Oct. 11, according to FactSet data. What’s driving markets? Chinese stock markets touched a fresh four-year low and a seemingly hawkish Fed has combined to undercut investor sentiment on Thursday. The minutes of the Fed’s September meeting, released on Wednesday, indicated that policy makers are prepared to forge ahead with increases and will likely hike rates again as early as December, as expected. Tightening policy comes as no surprise but it does elevate concerns about increasing borrowing costs and the impact that that could have on equity prices, market participants say. Last week’s downdraft in stocks was attributed partly to a jump in yields of U.S. government bonds, which can also undercut appetite for stocks compared against so-called risk-free Treasurys. Rates hikes are expected to drive yields higher still. Read: Here’s why stock-market investors suddenly freaked out over rising bond yields Concerns about the vitality of Asian markets, in particular China’s, may also be weighing on the investment mood. Shanghai’s composite index
fell 2.9% and the Shenzhen A-Share
dropped 2.7%. Weakness in Beijing’s markets came after China’s currency, the yuan, briefly touched its weakest level since January of 2017. One buck last fetched 6.9379 yuan
up 0.2%. Those currency moves came after Treasury refrained from labeling China a currency manipulator in its biannual report on currency practices released late Wednesday. The U.S. and China have been locked in a trade spat that doesn’t show signs of easing and that threatens to produce intermittent headwinds for markets. Which stocks are in focus? Philip Morris International Inc. shares
jumped 3.4% after the company beat earnings estimates for the third quarter. United Rentals Inc.
was the S&P’s biggest loser, falling 9.4% after the equipment-rental company beat Wall Street estimates for the quarter but said its outlook didn’t include a pending $2.1 billion acquisition. Caterpillar Inc.
led the Dow’s descent, with shares slipping 3.9% ahead of the firm’s earnings release on Oct. 23. Alcoa Corp. shares
popped higher following better-than-expected earnings, and predictions from executives of an aluminum deficit for this year. The stock is up 7.3%. Invesco Ltd.
shares rose 2.6%, after it announced the acquisition of OppenheimerFunds, a subsidiary of Massachusetts Mutual Life Insurance. Endocyte Inc. shares
soared more than 50% after Novartis AG
said it would buy the cancer-drug maker for $2.1 billion. Shares of Travelers Cos. Inc. fell 1.4% in morning action, even as it posted earnings and revenue above analyst expectations. Danaher Corp.
stock is down 2.3% Thursday morning, though it too announced third quarter earnings and revenue above analyst estimates. Earnings reports for American Express Co.
and PayPal Holdings Inc.
were due after the close. Which data are in focus? First-time jobless claims fell by 5,000 from a week ago, as the Labor Department reported just 210,000 Americans applying for initial jobless benefits in the week ending Oct. 13, in line with economist estimates, according to a poll by MarketWatch, and close to 49-year lows. The Philly Fed manufacturing index came in slightly below last month’s reading, with a print of 22.2 in October, compared with 22.9 in September. Still, the figures were above expectations and indicate healthy activity in the factory sector. The Conference Board said its leading economic indicators rose 0.5% in September. What are strategists saying? Tom Essaye, president of the Sevens Report, pointed to weak export Japanese export data and a poor showing in the Chinese equities market as reason for softness in premarket trading Thursday morning. “Are any of those hugely negative events for U.S. equities? Probably not, but we need some good news for the market to turn higher,” he said. Essaye predicted that as earnings season heats up next week, that good news will be on the offing, “ But until we get a solid run of earnings growth and macro data, the stocks will move sideways, if not down.” Jay Hatfield, CEO and portfolio manager Infrastructure Capital Management, blames recent weakness in stocks on “normal October stock market behavior,” that is a result of increased short interest and a decline in buybacks that typically occur in the lead-up to earnings season. “We are going to be range bound for the next week or so as we find the bottom,” he said.
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