Wall Street Heads for Rare Back-to-Back Loss as Rally Stalls

S&P 500/ stock market losses/ Treasury yields/ Wall Street/ earnings reports/ U.S. stock market/ bond market/ Verizon earnings/ Newslooks/ NEW YORK/ J. Mansour/ Morning Edition/ U.S. stocks dipped on Tuesday, with the S&P 500 down 0.4%, heading for its first consecutive loss in over a month as Wall Street’s rally cools. Disappointing revenue from major companies like Kimberly-Clark and Verizon weighed on the market, while rising Treasury yields dampened investor sentiment. Despite these pressures, 3M provided a bright spot with stronger-than-expected earnings and a profit forecast boost.

Wall Street Faces Back-to-Back Losses Amid Earnings Reports: Quick Looks

• The S&P 500 fell 0.4%, marking its first consecutive loss in six weeks, with the Dow and Nasdaq also slipping.
• Companies like Kimberly-Clark, Verizon, and Sherwin-Williams reported weaker-than-expected revenue, dragging the market lower.
• Treasury yields remain elevated, increasing concerns over stock valuations as the bond market offers better returns.
• 3M was a rare standout, rising 4% after stronger-than-expected earnings and an improved profit forecast.

Wall Street Heads for Rare Back-to-Back Loss as Rally Stalls

Deep Look:

Wall Street’s record-breaking momentum took a hit on Tuesday as U.S. stocks declined for the second consecutive day. The S&P 500 dropped by 0.4%, positioning it for its first back-to-back loss in over six weeks. The Dow Jones Industrial Average dipped 91 points, or 0.2%, from its recent all-time high, while the Nasdaq composite shed 0.5% in early trading.

The market’s pullback comes after six straight winning weeks for the S&P 500, marking its longest rally of the year. Now, with rising Treasury yields and underwhelming earnings reports from major corporations, the rally is showing signs of fatigue.

Earnings Reports Weigh on Stocks

Several companies disappointed investors with their latest earnings reports, putting further pressure on the stock market. Kimberly-Clark, known for its brands like Kleenex and Huggies, tumbled 4.5% despite posting stronger-than-expected profits. The company’s revenue, however, fell short of forecasts, and it lowered its growth expectations for 2024, now targeting a 3% to 4% increase in underlying revenue—down from its previous “mid-single digit” forecast.

Verizon Communications also took a hit, sinking 6.2% after reporting weaker-than-expected revenue, though its profit slightly exceeded forecasts. The company’s results reflect a broader challenge in the telecom sector, as many firms grapple with slower revenue growth despite maintaining profitability.

Similarly, Sherwin-Williams, the paint and coatings giant, saw its stock drop 3.6% after reporting lower-than-expected profit and revenue. CEO Heidi Petz cited a “tough macroeconomic environment” and “continued choppiness in the demand environment,” particularly from do-it-yourself customers in North America, many of whom are feeling the pinch of high debt and inflation.

Treasury Yields Rise, Dimming Stock Appeal

One of the key factors behind the market’s cooling rally is the continued rise in Treasury yields. The yield on the 10-year Treasury dipped slightly to 4.16% on Tuesday, down from 4.20% on Monday, but remained significantly higher than last week’s 4.08% level.

Higher Treasury yields can make bonds a more attractive investment relative to stocks, leading investors to reconsider paying high prices for equities. Many critics have noted that stock prices already appear overvalued given the current economic environment, and rising yields could further challenge those valuations.

A Bright Spot: 3M Surges on Strong Earnings

While several companies weighed on the broader market, 3M provided a rare bright spot. The company, which produces household staples like Scotchgard and Post-it notes, saw its stock jump 4% after posting stronger-than-expected earnings. 3M also raised the lower end of its full-year profit forecast, giving investors a reason for optimism amid a sea of disappointing earnings.

Impact of Economic Resilience on the Fed’s Rate Outlook

The recent strength in the U.S. economy, reflected in a series of positive reports, has led many investors to temper their expectations for future interest rate cuts from the Federal Reserve. Previously, Wall Street had been betting on a significant reduction in rates as the Fed sought to support economic growth and curb inflation.

However, the unexpectedly robust economy has led to a shift in expectations. Traders are now largely anticipating the Fed to cut its main interest rate by half a percentage point by the end of the year, according to data from CME Group. Just a month ago, many were betting on more aggressive cuts of three-quarters of a percentage point or more.

The combination of resilient economic data and fewer expected rate cuts has added to the pressure on stock prices, as investors adjust to the likelihood of higher borrowing costs for a longer period.

Global Markets Mixed

The cautious mood extended beyond U.S. borders. In Europe, major stock indexes were modestly lower, though German software giant SAP managed to buck the trend with a slight rise following better-than-expected earnings. Meanwhile, in Asia, stock indexes were mixed, reflecting the broader uncertainty in global markets.

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