Stock market today: Wall Street falls after profit warnings, strong economic data

NEW YORK (AP) — Wall Street is falling in mixed trading Thursday after some big-name companies warned about an uncertain global economy hitting their profits. Reports also showed the U.S. economy continues to storm ahead despite much higher interest rates that have already lashed the stock market.

The S&P 500 was 1.1% lower in afternoon trading and on track for a ninth drop in the last 11 days. Another slide for Big Tech dragged on the market, even though the majority of stocks within the S&P 500 were rising. That sent the Nasdaq composite to a market-leading loss of 1.8%, as of 1:04 p.m. Eastern time, while the Dow Jones Industrial Average was down 206 points, or 0.6%.

The U.S. bond market has been at the center of sharp moves for financial markets around the world, and Treasury yields were swinging following a deluge of economic reports. The yield on the 10-year Treasury, which is the centerpiece of the bond market, fell to 4.87% from 4.96% late Wednesday. Earlier in the morning, it was again nearing its highest level since 2007.

A preliminary estimate suggested the U.S. economy’s growth accelerated during the spring by much more than economists expected. A separate report indicated the U.S. job market remains remarkably solid, with relatively few layoffs across the country. And the European Central Bank opted to refrain from hiking interest rates for the first time in more than a year.

Stocks have been under pressure since the summer as Treasury yields have spurted higher in the bond market. Those yields have been catching up with the main interest rate controlled by the Federal Reserve, which is at its highest level since 2001 as the central bank tries to get high inflation under control.

Higher bond yields make investors less willing to pay high prices for stocks and other investments. They also slow the economy bluntly, raising the risk of a recession in the future, and increase the pressure across the financial system.

Thursday’s strong economic reports show the U.S. economy is clearly not in a recession. But Wall Street is more concerned about what will happen rather than what’s in the past, and the worry is that a solid economy could put continued upward pressure on inflation. That in turn could push the Fed to keep rates high for a long time to defeat high inflation. And that would mean eventual weakness for the economy and corporate profits.

“The Fed’s job isn’t done, and it does not appear that higher interest rates are doing the job for them,” said Quincy Krosby, chief global strategist for LPL Financial.

In the near term, traders overwhelmingly expect the Federal Reserve to hold rates steady at its next meeting, which ends Wednesday. That would mark a second straight meeting where the Fed did not hike its main interest rate, which it has pulled above 5.25% from nearly zero early last year.

“Higher and hold, yes,” said Lindsay Rosner, head of multi-sector fixed income investing at Goldman Sachs Asset Management. “Higher and hiking, no.”

Even better-than-expected profits from some of Wall Street’s most influential companies haven’t been enough to arrest the market’s slide.

Meta Platforms dropped 4.2% even though the parent company of Facebook and Instagram reported fatter profit and revenue for the latest quarter than analysts expected.

Investors may have been spooked by the company’s warning that it’s seen some initial softness in advertising due to the latest Israel-Hamas war, and analysts said the company gave a wider range than it has in the past for its forecast of upcoming revenue.

Meta is one of the “Magnificent Seven” Big Tech stocks that have been responsible for a huge chunk of this year’s gains for the S&P 500. Two of them offered mixed reports a day earlier, with Alphabet tumbling 9.5% and Microsoft rising 3.1%.

The majority of companies have been topping analysts’ profit expectations for the summer, and the hope is still for S&P 500 companies to report their first overall growth in a year. But several big-name companies were falling Thursday following disappointing results or forecasts for upcoming trends.

UPS fell 5.4% after it cut its forecasts for some full-year results because of uncertainty about where the global economy is heading. Investors see UPS as a window into the global economy’s strength because it ships so many products around the world.

Align Technology, which makes Invisalign systems that straighten teeth, also said an uncertain global economy may weigh on its upcoming results. Its stock tumbled 25.1% after it reported weaker profit and revenue for the latest quarter.

On the winning side of Wall Street was IBM, which rose 4.1% after reporting stronger profit and revenue for the latest quarter than analysts expected.

In Washington, the election of a new speaker for the House of Representatives could offer some stability to a Capitol Hill that has been looking dysfunctional recently. Political squabbling has raised fears about how much debt the U.S. government is racking up, and it’s one of the reasons Treasury yields have been jumping recently.

With a new speaker in place, economists at Goldman Sachs say they still see a government shutdown of up to two to three weeks in November as the most likely case. They acknowledge it’s a close call, and such a shutdown would shave about half a percentage point of growth off the economy in the final three months of 2023 and the first quarter of 2024.

In stock markets abroad, indexes were modestly lower in Europe after falling more sharply in Japan and South Korea. Stocks edged higher in Shanghai.

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AP Business Writer Elaine Kurtenbach contributed.