US stocks fell in back-and-forth trading on Wednesday as a two-day protest boosted by a frighteningly better start to the earnings season has faltered.
S&P 500 (^ GSPC) fell 1.4% after the index gained more than 4% in the past two days, while the Dow Jones Industrial Average (^ DJI) decreased by 275 points, or 0.9%. The tech-heavy Nasdaq Composite (^ IXIC) fell 1.5%. Meanwhile, the benchmark 10-year Treasury note jumped above 4.1%.
Netflix (NFLX) was noticed after a big earnings beat after Tuesday afternoonn includes 2.41 million new subscribers – a key metric tracked by analysts – more than double Wall Street’s estimate of 1 million additions. Executives noted in the earnings report that the company was “on track to spur growth again” after a challenging first half of the year. Shares were up 13% Wednesday afternoon.
Elsewhere on the earnings front, Abbot Labs (ABT) shares fell 8% after the medical device maker weaker-than-expected growth report in international medical device sales due to difficulties from a strong US dollar and supply problems in China.
Shares of United Airlines Holdings (UAL) increased by nearly 7% after the airline reported Q3 earnings results were higher than expected due to strong travel demand and a profit forecast for the current quarter that beat Wall Street estimates.
The strong reports from Netflix and United Airlines added to a string of generally upbeat business results released earlier in the week from companies including Goldman Sachs (GS) and Johnson & Johnson (JNJ).
While the numbers have so far been better than expected, of the companies that have reported results for the third quarter so far, only 69 percent have reported higher-than-estimated earnings per share — below estimates. 5 year average is 77%, according to FactSet Research. And among those at the top of estimates, earnings rose 0.1% above estimates, well below the five-year average of 8.7%.
Many Wall Street strategists have emphasized that valuations still do not fully reflect lower earnings consistent with slowing economic growth, pointing out that futures earnings forecasts are still too high.
“If, as we expected, third-quarter earnings were disappointing and future earnings expectations were guided lower, we have a lower guidance,” said Gargi Chaudhuri, head of investment strategy at iShares at BlackRock. could see another downside for equities,” said Gargi Chaudhuri, head of iShares investment strategy at BlackRock. “Don’t be fooled or chased by these bear market rallies.”
“Of course, the market will bottom out eventually, but until the axes or Fed earnings are properly marked, we think that time has not come,” Chaudhuri said.
In commodity markets, oil prices edged higher amid concerns that new European sanctions against Russia could choke off supply. The Biden administration is expected to announce a plan on Wednesday to release 15 million barrels from US strategic stockpiles to lower gas prices. West Texas Intermediate (WTI) crude oil futures rose about 1.5% to $84 a barrel.
Across the Atlantic, the UK has extended a period of uncertainty as investors assess double-digit inflation print for September 10.1%, putting a recent emergency move by the Bank of England to sell government bonds into question. The pound weakened and the gilts were moved lower.
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Alexandra Semenova is a reporter for Yahoo Finance. Follow her on Twitter @alexandraandnyc
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