U.S. equity indexes declined on Wednesday, as risk-off sentiment spread across most sectors, driven by continued gains in government bond yields. U.S. Treasury yields climbed throughout the day, with the 10-year yield rising by two basis points to 4.23%, marking its highest level since late July. The two-year yield also gained 2.8 basis points, reaching 4.07%, its highest since mid-August.
Growing doubts that the Federal Reserve will be less dovish than investors had hoped pushed Treasury yields higher, while investors wait for another round of earnings reports to gauge the health of the economy. Electric vehicle maker Tesla is scheduled to report results after Wednesday’s closing bell, along with other major names like T-Mobile US, IBM, ServiceNow, and O’Reilly Automotive.
Corporate profits are emerging as the big driver of what the market is likely to do in the near term, and if earnings results fall short of expectations, the stock market’s reaction could be severe. Conversely, positive earnings can drive investor optimism, leading to increased buying activity and higher stock prices.
See Related: Fed Chair Jerome Powell Pushed Back Firmly Against Market Speculation Of Imminent Rate Cuts.
Earnings Gain And S&P 500 Companies
Analysts are estimating a 4.1% year-over-year earnings gain for S&P 500 companies in the third quarter as of Wednesday, based on results from 120 of the companies and estimates for the rest, according to LSEG data. That’s barely changed from last week’s estimate for 4.0% growth but the latest estimate is still down versus the Oct. 11 estimate for 4.9% growth, based on LSEG data.
In economic news, U.S. existing home sales unexpectedly dropped in September, according to data from the National Association of Realtors. However, indicators typically linked to stronger sales are starting to emerge. It is also important to mention that mortgage application volume in the US declined for the fourth consecutive week to its lowest point since July amid lower purchase and refinancing activities. National Association of Realtors Chief Economist Lawrence Yun said:
“There are more inventory choices for consumers, lower mortgage rates than a year ago, and continued job additions to the economy.”
Oxford Economics predicts a modest recovery in home sales beginning in the fourth quarter. While sales are expected to pick up next year, the firm cautioned that the high interest rates and the impact of hurricanes Helene and Milton could push back this anticipated rebound.
