Wall Street closed lower on Wednesday as a wave of mixed earnings, including Netflix’s disappointing results, dampened risk sentiment as investors assessed reports that the Trump administration is considering curbs on exports to China made with U.S. software.
All three major U.S. stock indexes extended their losses after the report, with weakness in tech and communication services stocks weighing the Nasdaq down the most. The new export curbs, which would include a wide array of goods ranging from laptops to jet engines, are some of the measures being considered in retaliation against Beijing’s latest round of rare earth export restrictions, and mark yet another escalation of trade tensions between the world’s two largest economies.
U.S. President Donald Trump said on Tuesday he thinks he will have a “very successful meeting” with Chinese President Xi Jinping, but also said perhaps the encounter in South Korea later this month will not happen.
The Washington-Beijing trade dispute “has been ongoing and probably will continue until the potential meeting with Trump and Xi,” said Tom Hainlin, a national investment strategist at U.S. Bank Wealth Management in Minneapolis. “Add to that, some tech companies reported some disappointing numbers.”
“But it’s been a pretty good earnings season, and (stocks are) not that far off all-time highs,” Hainlin added. “We wouldn’t tell investors to change their allocations based on a day like today.”
Canada’s main stock index managed to claw back some recent declines as higher oil prices boosted energy shares, but the move was limited amid the trade tensions.
The S&P/TSX composite index ended up 94.16 points, or 0.3%, at 29,982.98. On Tuesday, the index posted its lowest closing level since October 10 as gold’s sharpest single-day drop in five years pressured metal mining shares.
The TSX materials group, which includes metal mining shares, was up 0.1%. The price of gold fell 0.5%, adding to the previous day’s decline. Still, gold was up about 57% since the start of the year as mounting economic and geopolitical uncertainty alongside expectations of further interest rate cuts by the U.S. Federal Reserve supported demand for the precious metal.
The TSX energy sector rose 1.5% as the price of oil settled 2.2% higher at $58.50 a barrel on growing U.S. energy consumption. After the settlement close, it rallied further to above US$59, when U.S. Treasury Secretary Scott Bessent said more U.S. sanctions targeting Russia would be announced this week.
Industrials also notched gains, adding 0.5%, and consumer staples ended 0.8% higher.
The TSX has advanced 21.25% since the start of the year and notched a record closing high as recently as last Wednesday.
Among stocks, Teck Resources beat third-quarter profit estimates, lifted by higher copper and zinc prices. Still, its shares ended 1.8% lower.
In the U.S., Netflix slid 10.1% after the streaming company missed quarterly profit expectations, raising concerns about stretched valuation.
Texas Instruments posted lower-than-expected revenue and profit forecasts, dragging the chipmaker’s shares down 5.6%. The Philadelphia Semiconductor Index, which has outperformed the broader market this year driven by artificial intelligence fervor, tumbled 2.4%. The chip index touched a record high on Monday.
Tesla, the first of the “Magnificent Seven” group of artificial intelligence-related momentum stocks to post third-quarter earnings, posted better-than-expected revenue as tax credit expiry drives U.S. sales of electric vehicles. Its shares edged 0.5% lower in extended trading.
Intuitive Surgical jumped 13.9% following the company’s third-quarter earnings beat.
AT&T fell 1.9% even as it added more wireless subscribers than expected for the third quarter.
Third-quarter earnings season is well underway, with 86% of the companies that have reported beating Wall Street estimates. Analysts currently expect third-quarter S&P 500 earnings growth, on aggregate, of 9.3% year-on-year, an improvement over the 8.8% annual growth estimate as of October 1, according to the most recent data from LSEG.
“You earn high valuations by achieving those expectations, and in general companies have so far been meeting or exceeding those expectations,” Hainlin said. “And those that haven’t are not being rewarded by investors with patience.”
The Dow Jones Industrial Average fell 334.33 points, or 0.71%, to 46,590.41, the S&P 500 lost 35.95 points, or 0.53%, to 6,699.40 and the Nasdaq Composite lost 213.27 points, or 0.93%, to 22,740.40.
Of the 11 major sectors of the S&P 500, industrials fell the most, with energy enjoying the biggest percentage gain.
Declining issues outnumbered advancers by a 1.47-to-1 ratio on the NYSE. There were 142 new highs and 63 new lows on the NYSE. On the Nasdaq, 1,362 stocks rose and 3,275 fell as declining issues outnumbered advancers by a 2.4-to-1 ratio. The S&P 500 posted 14 new 52-week highs and three new lows while the Nasdaq Composite recorded 45 new highs and 116 new lows.
Volume on U.S. exchanges was 24.76 billion shares, compared with the 20.60 billion average for the full session over the last 20 trading days.
Reuters, Globe staff