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Cyclicals drag S&P 500 lower; Microsoft, Alphabet keep Nasdaq flat

EconomyOct 27, 2021 07:26PM ET
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2/2 © Reuters. FILE PHOTO: Traders work on the floor of the New York Stock Exchange (NYSE) in New York City, U.S., October 18, 2021. REUTERS/Brendan McDermid 2/2

By Chuck Mikolajczak

NEW YORK (Reuters) - The Nasdaq ended little changed on Wednesday, boosted by gains in Microsoft and Google parent Alphabet (NASDAQ:GOOGL) on the heels of their quarterly results, but a drop in oil prices and a pullback in Treasury yields weighed on cyclical sectors and pulled the S&P 500 lower.

Microsoft Corp (NASDAQ:MSFT) gained 4.21% to close at a record high after forecasting a strong end to the calendar year, fueled in part by its booming cloud business. Alphabet Inc jumped 4.96% after reporting a record quarterly profit on a surge in ad sales.

The gains in the two stocks accounted for nearly 90 points to the upside in the tech-heavy Nasdaq while Microsoft was the biggest boost to the Dow Industrials, S&P 500 and Nasdaq.

A pullback in longer-term U.S. Treasury bond yields and a flattening of the yield curve also helped support growth names such as those in consumer discretionary and communications services, which were the only advancing S&P sectors on the day.

The benchmark 10-year U.S. Treasury yield declined for a fourth straight day, dropping more than 6 basis points to put it on track for its biggest one-day decline since Aug. 13.

"The growthy names will get a boost not just from some of the earnings stuff but because interest rates are lower," said Megan Horneman, director of portfolio strategy at Verdence Capital Advisors in Hunt Valley, Maryland.

"Interest rates are temporarily lower because of the fact that there is some uncertainty from the tax perspective and what that might do. We do know the Fed is going to taper, that has pretty much been priced in but now you have a lot of talk about what the future of the Federal Reserve may look like."

The Dow Jones Industrial Average fell 266.19 points, or 0.74%, to 35,490.69, the S&P 500 lost 23.11 points, or 0.51%, to 4,551.68 and the Nasdaq Composite added 0.12 point, or unchanged, to 15,235.84.

In contrast, the flattening curve served to weaken financials, while a drop in crude prices after data on U.S. stockpiles pulled energy names lower, with both sectors suffering their biggest one-day percentage decline in five weeks. JP Morgan shares fell 2.08% and Exxon Mobil (NYSE:XOM) declined 2.60%.

A solid start to earnings season has helped push the S&P 500 and the Dow to all-time highs this week, as investor concerns over the ability of companies to navigate supply-chain bottlenecks, labor shortages and rising price pressures have been allayed for now. The Nasdaq sits less than 1% away from Sept. 7 closing record.

"While we are not out of the woods by any means, companies are adjusting quicker than we had anticipated," said Horneman.

Profits for S&P 500 companies are expected to grow 37.6% year-on-year in the third quarter. Out of the 192 companies that have reported earnings, 82.8% have topped analyst expectations, according to Refinitiv IBES data.

The move into the growth names like technology stocks was also triggered after some U.S. Senate Democrats proposed taxing billionaires' unrealized gains from their assets, while concerns around the timing of rate hikes resurfaced ahead of the Federal Reserve's policy meeting next week.

The S&P 500 growth index climbed about 0.28% while its value counterpart fell 1.44%.

Robinhood Markets Inc (NASDAQ:HOOD) tumbled 10.44% after the retail broker reported downbeat third-quarter revenue as trading levels declined for cryptocurrencies including dogecoin.

Declining issues outnumbered advancing ones on the NYSE by a 2.43-to-1 ratio; on Nasdaq, a 2.29-to-1 ratio favored decliners.

The S&P 500 posted 36 new 52-week highs and 5 new lows; the Nasdaq Composite recorded 72 new highs and 133 new lows.

Volume on U.S. exchanges was 11.74 billion shares, compared with the 10.43 billion average for the full session over the last 20 trading days.

Cyclicals drag S&P 500 lower; Microsoft, Alphabet keep Nasdaq flat
 

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Comments (6)
Darrell Peterson
Darrell Peterson Oct 28, 2021 1:06AM ET
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The Fed screwed up royally, dopes are way behind the curve . what did they call it ? transitory , lol , lmao . doomed .
George Pichurov
George Pichurov Oct 27, 2021 4:30PM ET
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Federal needle pull off weighs on SP.
Stan Smith
Stan Smith Oct 27, 2021 12:57PM ET
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Hmmm...no news on this blockbuster headline? Bank of Canada warns on prolonged inflation, ends bond-buying program
Mitchel Pioneer
Mitchel Pioneer Oct 27, 2021 11:17AM ET
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The pumps are humming to criminally inflate the NASDAQ.  Gotta have it join the other two criminally inflated indices at "record highs."  Welcome to the US Ponzi Scheme, greatest financial fraud in history, as it financially defiles America in broad daylight.
George Pichurov
George Pichurov Oct 27, 2021 11:17AM ET
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Antonio Velardo  same but true. Sadly, americans punished communism everywhere else just to invite it warmly in their own yard.
Empire Destroyer
Empire Destroyer Oct 27, 2021 11:17AM ET
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America is communism for the rich, democracy for the poor so they feel like they have a say or some influence 🤣🤣🤣
George Pichurov
George Pichurov Oct 27, 2021 10:01AM ET
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Upbeat report that slams the yields down. How optimistic for the economics.
me ish
me ish Oct 27, 2021 10:01AM ET
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yes, the writing is on the wall - too many tech companies that rely on advertising revenue are all down on ad revenue - retailers are not advertising when they're very concerned that they're not going to be able to fill their shelves for the holiday season and are therefore expecting far fewer profits that they were counting on for the holiday season - this year, I don't believe we're going to see the Santa Claus rally - if the Q3 results are so-so, Q4 could be far worse. inflation is not transitory and along with the withdrawal of a lot of social support for the masses, that's all going to show for Q4
Rajeendran Paruvayakode
Rajeendran Paruvayakode Oct 27, 2021 9:52AM ET
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it will collapse today. wait and see
chase millions
chase millions Oct 27, 2021 9:52AM ET
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agreed. Rising wedge , 3hr top candle, so many doji on 12 hour and daily
Edward Chong
Edward Chong Oct 27, 2021 9:52AM ET
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today !
 
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