Stocks declined on Thursday after the blue-chip Dow Jones Industrial Average retook its record high in the prior session amid solid corporate earnings.
The Dow Jones Industrial Average fell 92 points, or 0.2%. The S&P 500 lost 0.01%. The Nasdaq Composite added 0.3%.
IBM shares lost more than 7% following a revenue miss in the third quarter. Its top two business segments — global services and the Cloud & Cognitive Software business — fell short of estimates.
Tesla shares gained 2% after the electric-car maker posted record earnings and revenue in the third quarter that beat expectations.
American Airlines added about 1% after it posted a profit due to federal aid for the third quarter.
Corporate America has so far had a solid performance in the third quarter, even as inflation proves to be more persistent as many expected. Of the 101 S&P 500 companies that have reported through Wednesday, 84% topped analysts’ earnings estimates according to Refinitiv.
“Investors are understandably concerned about reports that inflation pressures are eroding profit margins and what that may mean for the stock market,” however, “elevated inflation appears to bolster S&P 500 EPS on the whole,” Jim Paulsen of the Leuthold Group, said in a note Thursday. He added that for the last 20 years, the correlation between the inflation rate and profit margins has been positive.
The Labor Department reported 290,000 initial jobless claims for the week ending Oct. 16, which is down from the previous week by 6,000 and lower than the 300,000 estimated by economists surveyed by Dow Jones. Investors are watching to see if jobless claims continue to fall, as the Federal Reserve has indicated it will start to normalize its monetary policy as the central bank nears its economic goals.
The Dow jumped about 150 points to hit an intraday record Wednesday, surpassing its peak from mid-August. It fell just short of its closing record. The S&P 500 climbed 0.4% for its sixth straight positive day and sits just 0.2% below its all-time high. The tech-heavy Nasdaq Composite closed Wednesday’s session slightly lower, however.
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Investors have been monitoring the third-quarter earnings season to assess profit growth as well as signs of cost pressures and supply-chain disruptions for the rest of the year. Of the approximately 70 S&P 500 companies that have reported results so far, 86% posted earnings that topped analysts expectations, according to Refinitiv.
“There are no signs of widespread erosions of margins at the moment. Perhaps there is so much money sloshing about that for now prices are broadly being passed on,” Jim Reid, head of thematic research at Deutsche Bank, said in a note.
Railroad giant CSX jumped more than 3% following a stronger-than-expected earnings report.
On Wednesday, the Food and Drug Administration authorized booster shots of both Johnson & Johnson and Moderna’s Covid vaccines, a critical step in distributing extra doses to tens of millions of people. U.S. regulators also approved “mixing and matching” vaccines.
