Stocks Fall as Inflation, Poor Earnings and Slumping Crude Foster Anxiety
US markets fell today, weighed down by a slide in the shares of health care, materials and utilities companies and the downward slide of the price of oil as energy stocks were also affected. Investors are assessing corporate America as companies begin to report earnings over the next few weeks.
By Paolo Palazzi-Xirinachs
Tuesday, October 11, 2016 - 00:00
In mid-afternoon trading, the Dow Jones was down 1.14% and the S&P 500 was down 1.31%. The Nasdaq index dropped 1.58%.
Most of the market’s attention was on bond markets, with yields back at levels not seen in about six months. Bond yields were being driven up at a time of growing anticipation among investors that the Federal Reserve would raise its main interest rate later this year, as well as uneasiness over the effect of rising oil prices.
Oil slipped from a 15-month high in New York amid uncertainty over whether Russia would join an OPEC deal to curb supply. Oil futures Futures fell 1.1%. Russia’s biggest producer Rosneft PJSC said it won’t cut output, according to Reuters, after President Vladimir Putin said at a conference in Istanbul that his nation is willing to join efforts by OPEC to stabilize the market through a production freeze or cut. Supply and demand will come back into balance earlier than expected if OPEC’s accord to trim output is implemented, the International Energy Agency said. Price declines accelerated as the dollar climbed, curbing the appeal of commodities.
Investors are currently assigning about a two-thirds chance of a December rate increase, based on prices in federal funds futures contracts, and a less than 20% chance of a move next month. The Fed’s preferred measure of inflation, after stripping out volatile food and energy, ticked up to 1.7% in the year through August. Early this year, worries over slowing growth in China helped put the Fed off a potential hike, and the UK’s vote in June over European Union membership weighed on June and July meetings.
In stock market news, shares of the genetics research company Illumina sank 25.3% after the company announced late Monday that its third-quarter revenue fell short of Wall Street’s expectations. Alcoa stock slid 10.3% after it reported softer-than-expected results for the third quarter, its last one before Alcoa splits into two companies on Nov. 1. Shares of the medical device maker St. Jude Medical also dropped 3% after the company warned that the lithium battery in some of its implanted heart devices may run out of energy prematurely. Abbott Laboratories, which in April agreed to buy St. Jude for $25 billion, also slid 4.2% in response.
However, Apple stock was up 0.6% after it's rival, Samsung, announced it was discontinuing its Galaxy Note 7 phone permanently because of overheating handsets. The Galaxy Note 7 competed with Apple’s iPhone.
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