Nasdaq, S&P 500 fall as growth shares lose steam; banks report mixed earnings

NEW YORK: The Nasdaq and the S&P 500 fell on Thursday as rising yields weighed on megacap growth stocks, while a slew of Wall Street lenders reported mixed earnings on the last day of a holiday-shortened week.

Twitter Inc declined 0.7%, reversing early gains, after Tesla Inc CEO Elon Musk offered to buy the social media company for about $43 billion. The electric-car maker’s shares fell 3.3%.

Six of the 11 major S&P 500 sectors declined, with technology and communication services falling more than 1% each and leading losses.

“Not many retail or professional investors are rushing into the tech space now, especially the high valuation tech space,” said Robert Pavlik, senior portfolio manager at Dakota Wealth Management.

“It’s the traders and algorithms that take advantage of daily price swings, and that’s why you’re seeing this movement in the tech shares.” Megacap growth names such as Amazon.com Inc and Apple Inc fell more than 1.5% each as Treasury yields jumped following two days of declines after a flurry of economic data and a policy announcement from the European Central Bank.

The benchmark 10-year Treasury yield was up 2.80%, after falling as much as 2.65% earlier in the day.

New York Fed President John Williams said the US central bank should reasonably consider raising interest rates by a half percentage point at its next meeting in May, echoing calls from other policymakers.

Growth stocks have been hammered in the last few weeks as Treasury yields rallied on signals from the US Federal Reserve that it will hike rates aggressively to control soaring inflation.

“Staples, basic materials, utilities, energy and healthcare continue to tell you that people are worried about inflation. It’s hard to feel confident that inflation has peaked,” Pavlik said.

Morgan Stanley and Citigroup Inc rose 1.4% each on beating analyst expectations for profit despite a sharp drop in first-quarter earnings.

Goldman Sachs Group Inc edged 0.3% lower after reporting a 43% drop in profit, while Wells Fargo & Co fell 3.2% following a 21% drop in quarterly profit.

At 11:58 a.m. ET, the Dow Jones Industrial Average was up 41.79 points, or 0.12%, at 34,606.38, the S&P 500 was down 25.63 points, or 0.58%, at 4,420.96, and the Nasdaq Composite was down 181.20 points, or 1.33%, at 13,462.39.

Overall, analysts have been less optimistic about earnings this quarter amid the ongoing war in Ukraine, soaring inflation and a more hawkish Fed.

Aggregate annual S&P 500 earnings growth for the first three months of 2022 is estimated at 6.3%, compared to 32.1% in the previous quarter, according to IBES data from Refinitiv.

Declining issues outnumbered advancers for a 1.65-to-1 ratio on the NYSE and a 1.91-to-1 ratio on the Nasdaq.

The S&P index recorded 26 new 52-week highs and six new lows, while the Nasdaq recorded 50 new highs and 138 new lows.