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S&P 500 Stumbles as Cyclicals Slip, Tech Loses Steam

Stock MarketsOct 27, 2021 04:04PM ET
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© Reuters.

By Yasin Ebrahim

Investing.com – The S&P 500 slipped Wednesday, as a decline in cyclical sectors including financial and energy offset and an intraday rally in tech ran out of steam. 

The S&P 500 fell 0.5% to end the day below its closing record of 4,574.79. The Dow Jones Industrial Average slipped 0.74%, or 265 points, while the Nasdaq was up 0.12%.

Energy fell more than 1% as oil prices were pressured by expectations for a jump in global crude supplies from Iran as Tehran and European Union agreed to resume talks on to revive the 2015 nuclear deal before month-end.

Oil prices were also pushed lower by data showing a larger than expected build in the U.S. weekly crude stockpiles.

Crude inventories rose by 4.3 million barrels for the week ended Oct. 24, well above analysts' expectations for a build of 1.9 million barrels.

Still, there are some who suggest that energy, which up about 16% year to date, likely has further room to run.

“I'm bullish on energy as underinvestment in energy projects should continue to support the supply and demand imbalance, substantially pushing crude prices higher,” Aptus Capital Advisors portfolio manager David Wagner told Investing.com in a recent interview.

“When you couple that with energy firms’ plans of returning capital shareholders, I just don’t see energy as being an underperformer,” Wagner added.

Financials were dragged lower by falling bank stocks as Treasury yields slipped, with the 10-year yield dropping below 1.6%, and the 30-year yield dipping below 3%. 

As well as weaker bank stocks, a 7% slump in Capital One Financial (NYSE:COF) also weighed on the sector after the company's better-than-expected results were offset by concerns about rising expenses amid a ramp-up in marketing costs.

Wall Street analysts, however, remained constructive on Capital One, forecasting the ramp-up in marketing to lead to further growth.

"We view [higher marketing expenses] as positive driver future growth and a sign that management is becoming more confident in the outlook, though it is a near-term expense headwind," RBC said in a note.

Technology sold off late into the close, shrugging off a falling Treasury yields and a climb in Microsoft and Alphabet.

Alphabet (NASDAQ:GOOGL)'s third-quarter earnings beat was driven by strong performance in its digital advertising search business, which was less vulnerable to Apple (NASDAQ:AAPL)'s privacy changes. Its share price closed up about 5% higher.

"Search [was] the clear beneficiary from Apple's ATT [App Tracking Transparency], and the least exposed to mobile tracking and measurement issues," Wedbush said in a note.

Microsoft (NASDAQ:MSFT) delivered fourth-quarter guidance that topped expectations as its cloud business Azure continued to impress, growing more than 50% in the third quarter. Its shares gained nearly 5%.

Twitter (NYSE:TWTR) plunged more than 10% after reporting third-quarter earnings that fell short of Wall Street estimates.

Boeing (NYSE:BA), meanwhile, fell more than 1% after third-quarter results fell short estimates as the rebound in 737 Max demand was offset by production delays of its 787 Dreamliner jets as the aircraft manufacturing continues to address manufacturing flaws.

Robinhood Markets (NASDAQ:HOOD) slipped more than 10% to close below its IPO price of $38 a share after the brokerage reported quarterly results late Tuesday that missed expectations amid slowing cryptocurrency trading activity.    

On the economic front, durable goods orders for September were better than expected amid smaller than expected decline in aircraft and autos orders.

"Headline durable goods orders were depressed by declines in the civilian aircraft and autos components, but both were smaller than we expected. Behind the headline noise, the 0.8% jump in core capital goods orders - the biggest since June - is very encouraging," Pantheon Macroeconomics said in a note.

S&P 500 Stumbles as Cyclicals Slip, Tech Loses Steam
 

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Comments (4)
Tutor Joseph
Tutor Joseph Oct 27, 2021 9:03PM ET
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Virtual Bank vs Dead souls. Choose one.
Michael Angelo
Michael Angelo Oct 27, 2021 5:09PM ET
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Somebody knows something we don't, included news services. Tomorrow will know if it's transitory or...
TheEnd IsNigh
TheEnd IsNigh Oct 27, 2021 5:09PM ET
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Atlanta Fed released revised estimates today on Q3 GDP growth. In May, the projection was 14% for the quarter. As of today's report, it dropped from 1.2% to 0.2%...thanks to exports being strangled. We all know where this is heading don't we? My moniker is a hint.
Tutor Joseph
Tutor Joseph Oct 27, 2021 5:09PM ET
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The markets will all flash red
George Pichurov
George Pichurov Oct 27, 2021 4:18PM ET
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You haven't yet seen what stumble means
Lesko Brandon
Lesko Brandon Oct 27, 2021 4:15PM ET
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'U.S. Holiday-Spending Plans Tempered by Inflation, Survey Shows"...cost of living up, inflation 5.4%, supply chain issues, housing price bubble, millions out of work, gas prices up, etc...meanwhile Wall Street at all time highs. There is a reason that Occupy Wall Street and BLM started under Obama. Leftists love self-harm and is why they keep voting for their DNC cult masters. We have not had oil and food prices this high since Brandon was VP.
Peter ONeill
Peter ONeill Oct 27, 2021 4:15PM ET
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Oil prices were around the 80-85 Dollar mark in 2018 also. I do not know what the Fed is thinking - that they print 6 TRILLION in stimulus (more than the whole compounded US debt from 1776 until 2000) and then think Inflation will be short term despite huge bottlenecks, shortages, people with huge savings as only 20% or so were truly impacted by covid re wages and massive global debt piles.  Sooner or later Powell is going to have to admit he got it 1000% wrong on inflation and start increasing rates. That + Democrats doing their mad billionaire tax might finally = a proper correction of 20%+ (up until now so much money in circulation that people throwing money around like no tomorrow and buying any tiny dip without fear since Fed is bankrolling them).
Antonio Velardo
Antonio Velardo Oct 27, 2021 4:15PM ET
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Peter ONeill are you short or long on this market?
 
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