US Markets

Stocks close lower after global bonds sell-off; real estate slides 2%

Fichthorn: We're massively short bonds

U.S. equities closed lower on Thursday as investors parsed through a fresh batch of corporate earnings results and economic data, while sovereign bonds around the world fell.

"There's a lot of activity taking place, but the middle of the rope is not moving" in the stock market, said Mike Bailey, director of research at FBB Capital Partners. "Bond investors that were worried the UK and Europe were going off a cliff got a bit more relaxed."

The Dow Jones industrial average gyrated between gains and losses before closing about 30 points lower, with IBM contributing the most gains, offsetting losses in Boeing. The S&P 500 also held near the flatline for a large part of the session, before closing 0.3 percent lower, with telecoms advancing 1.6 percent to lead advancers and real estate falling 2.4 percent to lead decliners. The Nasdaq composite lagged, dropping 0.65 percent.

"I think you're seeing a tug of war between earnings ... and rising yields. I think the rise in yields is a bit of a correction," said Jim Davis, regional investment manager for The Private Client Group of U.S. Bank.

U.S. Treasury yields rose broadly, with the two-year note yield trading around 0.88 percent and the benchmark 10-year yield around 1.84 percent, following other sovereign bond yields. Yields in other countries, such as Brazil, Italy and India also spiked.

"Since the end of June, there has been a very high correlation between the Japanese yen and the U.S. 10-year note," said Guy LeBas, chief fixed income strategist at Janney Montgomery Scott, adding that as the yen falls, so does the benchmark U.S. note. "This relationship is a trading relationship, so it's not long-term, but it's most evident at the long end of the curve."

The U.S. dollar traded higher against a basked of currencies, with the euro near $1.09 and the falling to 105.3.

"I do have a feeling that something has changed here today, and that this 1.83 level on 10s may be more sustainable than last week," LeBas said.

Traders on the floor of the New York Stock Exchange
Getty Images

The 10-year UK Gilt yield popped about 10 basis points after better-than-expected GDP data from the United Kingdom, while the British pound fell 0.56 percent to $1.217.

"Traders were waiting for an upbeat number and they have got one. The number came better than expected. But manufacturing and industrial sector have performed badly and this is what we want to emphasize," Naeem Aslam, chief market analyst at Think Markets, said in a note.

"It is certainly too early to call that Brexit effects are over or they will not have an impact on the UK's growth. The resilience picture may continue, but our chief concern is towards the investment and business investment and foreign investors are very hesitant in this space," he said.

On the earnings front, Colgate-Palmolive, Bristol-Meyers Squibb, Ford and UPS are just a few of the companies that posted quarterly results before the bell. Alphabet,, LinkedIn and Baidu are among companies set to report after the bell.

Corporate earnings have done well relative to expectations. According to data from The Earnings Scout, 50 percent of S&P 500 components had posted results as of Thursday morning, with 73 percent beating earnings estimates and 61 percent topping sales expectations.

"Portfolio managers will focus on earnings as we progress through the heart of the Q3 reporting season," said Jeremy Klein, chief market strategist at FBN Securities, in a note. "Extremely sanguine profit forecasts for the next calendar year have stabilized thereby compressing multiples on a daily basis. The forward P/E ratio for the S&P 500 currently resides 4.6% below its post-financial crisis peak to give shares the opportunity to enjoy a healthy Santa Claus rally after the dust settles around Washington."

In economic news, initial jobless claims fell 3,000 to 258,000, while durable goods for September unexpectedly fell. Pending home sales, meanwhile, rose 1.5 percent in September. The advanced read on third-quarter U.S. GDP is due Friday morning.

U.S. economic data have been of special importance to investors recently, as they gauge the likelihood of the Federal Reserve raising rates later this year. The central bank is scheduled to meet next week and, while monetary policy is largely expected to remain unchanged, market participants expect a quarter-point rate increase after the Fed's December meeting.

But despite the deluge of corporate results and economic data, U.S. stocks have largely stayed range-bound, with the S&P having fallen just 1.25 percent over the past three months, as of Wednesday's close.

S&P 500 3-month chart

Source: FactSet

"Overall, you have a market that has gone back and forth; I think we're just waiting for a catalyst," said Quincy Krosby, market strategist at Prudential Financial. "When you look at the tone of the market, you have fewer and fewer stocks leading it higher."

She also said there are still some concerns surrounding the outcome of the U.S. election on November 8. Democratic nominee Hillary Clinton's lead over Donald Trump has slightly narrowed recently, according to data from RealClearPolitics.

European equities erased earlier gains, with the pan-European Stoxx 600 index falling 0.01 percent. In Asia, stocks closed mostly lower, with the Nikkei 225 slipping 0.32 percent and the Shanghai composite falling 0.13 percent.

Major U.S. Indexes

The Dow Jones industrial average fell 29.65 points, or 0.16 percent, to end at 18,169.68, with Verizon leading advancers and Boeing the biggest laggard.

The fell 6.39 points, or 0.3 percent, to close at 2,133.04, with real estate leading eight sectors lower and telecommunications leading advancers.

The Nasdaq fell 34.29 points, or 0.65 percent, to 5,215.97.

About three stocks declined for every advancer at the New York Stock Exchange, with an exchange volume of 966.32 million and a composite volume of 4.115 billion at the close.

The CBOE Volatility Index (VIX), widely considered the best gauge of fear in the market, traded higher, near 14.9.

U.S. crude for December delivery rose 1.1 percent to settle at $49.72 per barrel.

Gold futures for December delivery rose $2.90 to settle at $1,269.50 per ounce.

On tap this week:



ATB: Alphabet,, Baidu, Amgen, Deckers Outdoor, Aflac, Digital Realty Trust, Cirrus Logic, Columbia Sportswear, Cypress Semiconductor, Eldorado Gold, Flex, Fortinet, Federated Investors, VeriSign, Yamana Gold


Earnings: Chevron, Exxon Mobil, A-B InBev, MasterCard, AbbVie, UBS, Ambev, BNP Paribas, Sanofi, AutoNation, Cabot Oil & Gas, Hershey, Phillips 66, Shire, Weyerhaeuser, Xerox, Apollo Global Management, Bloomin' Brands, CBOE Holdings, Legg Mason, Oaktree Capital, Tenneco

8:30 a.m.: Q3 GDP, advance

8:30 a.m.: Employment cost index

10 a.m.: Consumer sentiment

*All times Eastern. Planner subject to change.