By Sue Chang, MarketWatch , Chris Matthews
Bank of America earnings beat expectations
Stocks put in a mixed performance Monday as investors assessed
the fallout from last week's equity-market rout, sparked in part by
rising U.S. interest rates.
Strong gains in real estate and consumer staples sectors helped
to support the broader market but technology stocks remained stuck
in negative territory.
How are major benchmarks trading?
The Dow Jones Industrial Average climbed 50 points, or 0.2%, to
25,390 while the S&P slid a point to 2,765. The Nasdaq
Composite fell 27 points, or 0.4, to 7,469.
On Friday, the Dow Jones Industrial Average finished the day up
287.16 points, or 1.2%, to 25,339.99, in whipsaw trading. The
S&P 500 rose 1.4% to 2,767.13, snapping a six-day losing
streak. The Nasdaq Composite Index rose 2.3%, in its best daily
performance since March 26. But for the week, the Dow fell 4.2%,
the S&P lost 4.1% and the Nasdaq shed 3.7%, representing their
worst weekly performances since March.
Read: This stock-market pullback probably has further to go
(http://www.marketwatch.com/story/this-stock-market-pullback-probably-has-further-to-go-analysts-2018-10-15)
What's driving the market?
Investors remain spooked after last week's two-day selloff that
at its worst wiped 1,400 points off the Dow, and pushed the Nasdaq
toward correction territory. Losses were tied to jitters over a
sudden rise in interest rates, as the yield on the 10-year Treasury
note hit a seven-year high above 3.25% last week. That yield was
hovering at 3.15% on Monday.
See:Here's why stock-market investors suddenly freaked out over
rising bond yields
(http://www.marketwatch.com/story/stock-market-investors-are-right-to-be-frightened-by-rising-bond-yields-economist-2018-10-12)
Higher yields raise borrowing costs for corporations and lure
investors away from perceived riskier asset such as stocks. Yields
move inversely to price.
Read:Here's how much damage has been done to the stock market
during a powerful rout
(http://www.marketwatch.com/story/heres-how-much-damage-has-been-done-to-the-stock-market-during-a-powerful-rout-2018-10-11)
Seen as a major driver for stocks in the coming week,
third-quarter earnings season gets under way in earnest this week,
with Goldman Sachs Group Inc.(GS) among the big bank names
reporting, while streaming video group Netflix Inc.(NFLX) will also
be a highlight.
Netflix earnings:Was the streaming giant's second-quarter miss
really just a blip?
(http://www.marketwatch.com/story/netflix-earnings-was-the-streaming-giants-second-quarter-miss-really-just-a-blip-2018-10-11)
Geopolitical tensions were another worry for investors, starting
with Saudi Arabia, which is locked in a diplomatic spat with the
U.S. On Sunday, President Donald Trump threatened "severe
punishment" for the Saudis if any connection was found between the
kingdom and a missing dissident journalist. That country responded
with an immediate threat to retaliate, sparking a rally for oil
prices.
Those gains have been pared, however, as Trump appeared to
soften his tone on the controversy Monday morning. The president
tweeted on the subject, saying he had spoken to Saudi Arabia's King
Salman, who denied any knowledge of what happened to the
journalist, and that he would be sending Secretary of State Mike
Pompeo to the country to meet with the king.
(https://twitter.com/realDonaldTrump/status/1051814214212485120)
Saudi backlash:More and more U.S. companies distance themselves
from Saudi money
(http://www.marketwatch.com/story/corporate-america-begins-to-distance-itself-from-saudi-money-due-to-khashoggi-affair-2018-10-11)
Need to know:Don't rule out $400 oil if U.S. sanctions Saudi
Arabia
(http://www.marketwatch.com/story/call-of-the-day-dont-rule-out-400-oil-if-the-us-sanctions-saudi-arabia-2018-10-15)
Investors are also parsing comments made in a "60 Minutes"
interview
(http://www.marketwatch.com/story/from-climate-change-to-china-to-kavanaugh-heres-what-trump-told-60-minutes-2018-10-14)
Sunday night, when he threatened a third round of tariffs on China,
which he said doesn't "have enough ammunition to retaliate."
What data are on tap?
U.S. retail sales rose 0.1% in September
(http://www.marketwatch.com/story/late-summer-hangover-us-retail-sales-are-soft-for-the-second-month-in-a-row-2018-10-15),
less than expected. Excluding car sales, the figure remained flat
last month.
The Empire State Index meanwhile rose 2.1 points to 21.1 in
October
(http://www.marketwatch.com/story/empire-state-index-points-to-strong-factory-activity-in-october-2018-10-15),
compared with 19 previously. Business inventories for August rose
0.5%
(http://www.marketwatch.com/story/us-business-inventories-rise-sharply-again-in-august-2018-10-15).
What are analysts saying?
Investors should look to recent history if they want to know
where markets are headed in coming weeks, said Thomas Martin,
senior portfolio manager with GLOBALT Investments. He argued that
the same factors that triggered February's stock market correction:
fears over rising rates and inflation and a resultant shift from
growth to value stocks--are those which led to last week's rout.
But just as they did in late February and March, rates "have taken
a big move back down," from last week's highs, he said. "We're now
in a phase where markets are digesting these new levels, and if
earnings continue to impress," another march higher similar to what
happened in the spring could be in store.
Investors need two things to keep buying the dips in the stock
market, said Hussein Sayed, chief market strategist at FXTM, in a
note to clients.
"One, which is the most important, is corporate profits must
remain robust and beat the 20% earnings growth projected for the
third quarter while painting a rosy outlook for the quarters to
come. Two, the U.S. and China need to cut a deal on trade, said
Sayed. "If those two criteria aren't met, then stocks might have
already peaked for 2018."
Read: The stock market's nightmare may be far from over
(http://www.marketwatch.com/story/the-stock-markets-nightmare-may-be-far-from-over-2018-10-12)
What stocks are in focus?
Bank of America Corp.(BAC) reported third quarter results that
beat expectations
(http://www.marketwatch.com/story/bank-of-america-profit-and-revenue-top-estimates-2018-10-15)
ahead of the New York market open, showing earnings per share of 66
cents versus the consensus expectations of 62 cents. Shares were
off 1.7%, partly due to flat loan growth.
Shares of Sears Holdings Corp.(SHLD) slumped 19% after the
iconic retailer filed early Monday for bankruptcy protection
(http://www.marketwatch.com/story/sears-files-for-chapter-11-bankruptcy-in-attempt-to-keep-stores-open-for-now-2018-10-15)
from creditors. The chapter 11 filing comes after the company
reached a deal with lenders that will allow it to keep hundreds of
stores open for now.
Shares of Dell TechnologiesInc. rose 0.4%, while VMware Inc.
shares shed 1.8%. Billionaire investor Carl Icahn on Monday
disclosed he had boosted his stake
(http://www.marketwatch.com/story/carl-icahn-to-oppose-dells-purchase-of-dvmt-tracking-shares-2018-10-15-61034053)
in shares that track Dell Technologies' (DVMT) interest in VMware
(VMW) to 8.3%. In a letter, he said he plans to vote against Dell
Technologies' plan to buy the stock.
How are other markets trading?
Shares in Asia
(http://www.marketwatch.com/story/asian-markets-resume-their-fall-with-tech-stocks-leading-the-way-2018-10-14)
finished lower, failing to pick up the baton from the U.S. on
Friday, led by a 1.9% drop for the Nikkei 225 index . Major
European indexes
(http://www.marketwatch.com/story/europe-markets-struggle-as-global-stocks-teeter-2018-10-15)
were weaker across the board.
Crude-oil prices rose slightly
(http://www.marketwatch.com/story/crude-prices-rise-on-growing-ussaudi-tensions-2018-10-15)
after President Trump moved to ease U.S.-Saudi tensions
(http://www.marketwatch.com/story/crude-prices-rise-on-growing-ussaudi-tensions-2018-10-15),
while gold settled higher and the U.S. dollar index
(http://www.marketwatch.com/story/dollar-slips-as-yen-and-franc-havens-gain-2018-10-15)
was down 0.2%.
--Anneken Tappe and Barbara Kollmeyer contributed to this
report
(END) Dow Jones Newswires
October 15, 2018 15:24 ET (19:24 GMT)
Copyright (c) 2018 Dow Jones & Company, Inc.