October 6, 2022

Dow Retreats on U.S. Debt Uncertainty

Stocks on Wall Street were mixed on Friday as investors sorted through news of the deal reached by European leaders on Greece’s debt and scenarios for global growth as corporate results trickled out.

United States investors were also warily watching the deficit-reduction talks in Washington, where President Obama and the Republican House speaker, John A. Boehner, were trying to shape a deal and avoid a government default in less than two weeks.

In afternoon trading the Dow Jones industrial average was down 40.57 points, or 0.32 percent, to 12,683.84. The broader Standard Poor’s 500-stock index was a point ahead, at 1,345.01 points, and the Nasdaq composite was up 25.00 points, or 0.88 percent, to 2,859.43.

It was a muted start to the last day of the trading week in which the markets have weathered heightened uncertainty over the euro zone debt crisis and the talks in Washington.

Financial markets in Europe on Friday continued to give a positive reception to a deal reached in Brussels on Thursday by European leaders that gave Greece more time to deal with its mountain of debt. Bank stocks in particular benefited, and Greek, Irish and Spanish bonds continued to rally.

In the United States, the Dow was on track to end the week higher, even though it was down for the day. That was partly because the Dow shot up more than 152 points on Thursday on news of the Brussels deal, propelling it to its highest close in more than two months. As of Thursday, the Dow was up 2.5 percent so far this month and 1.9 percent this week.

Quarterly corporate earnings in some bellwether stocks were released on Friday.

Caterpillar, which reported that second-quarter revenue was up 37 percent, said earnings per share were $1.72, slightly below expectations of $1.75, analysts noted. It also reported softening demand in China.

Caterpillar was trading about 5 percent lower.

“It’s basically cause and effect,” said Lawrence Creatura, portfolio manager at Federated Investors.

Timothy Hoyle, vice president of research at Haverford Investments, said the results “disappointed the market.” But he added: “I think the market might be overreacting.”

Another major industrial company, General Electric, reported results that slightly surpassed Wall Street’s expectations in both profits and sales. G.E. stock rose a slight 0.16 percent.

The industrial sector as a whole was down more than 1 percent. Telecommunications were 1.25 percent lower and financial stocks declined by 0.56 percent.

Prices rose as the yields on benchmark 10-year Treasury bonds fell to 2.98 percent, in what one analyst said was a predictable bout of behavior at the end of the week, before the market is closed for two days.

“Remember that today is Friday, and recently Friday tends to see more short-covering and safe-haven buying than the other days of the week,” said Kevin H. Giddis, the executive managing director and president for fixed-income capital markets at Morgan Keegan Company, in a research note. “Debt deals in Europe, debt deals in the U.S., debt deals at home,” he said. “The potential ‘rise and fall’ of these is causing investors to take a more conservative approach on the last day of the week before what might or might not happen over the weekend.”

In Europe, the package of measures approved by euro zone leaders includes a reduction in interest rates for the two other bailed-out countries as well — Ireland and Portugal.

The Euro Stoxx 50 index of blue chips opened strongly but gave up some of its gains and ended the day up 0.3 percent. Greek 10-year yields dropped below 16 percent for the first time since June 8, sinking 137 basis points to 15.12 percent, according to Bloomberg News. Irish 10-year yields tumbled 52 basis points to 11.83 percent. Spanish 10-year bond yields fell eight basis points to 5.65 percent while yields on Italian debt of the same maturity declined eight basis points to 5.27 percent.

The euro rose against a number of currencies including the Swiss franc and the pound, but fell slightly against the dollar, to $1.4370. Analysts said a report showing German business confidence declined by more than forecast in July was holding back stronger gains.

Article source: http://feeds.nytimes.com/click.phdo?i=45fe20e5ba1d364f3026df858765efed

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