A Stock Pullback, Despite Strong Earnings
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How did U.S. stock indices perform during this volatile week?
With your money briefing, I'm Charlie Turner in New York for The Wall Street Journal. If you're a stock investor, you're most likely glad the week is over and that October is almost over. Stocks tumbled Friday, resuming its slide after rebounding Thursday from a massive sell-off the day before. On Friday, the Dow Jones Industrials fell 296 points to 24,668. Tech stocks had another tough day, sending the Nasdaq Composite down 151 points. And the S&P 500 dropped 46. The Dow dropped 3% for the week. The Nasdaq fell 3.8%. And the S&P 500 closed nearly 4% lower for the week. Who better to put the week in perspective than Wall Street Journal Markets reporter Akane Otani, who's here in our studio. Connie, we got some disappointing sales numbers this week from Amazon and Google.
Tech was weak. I get the feeling it's not just a handful of tech firms, but that something is fundamentally wrong with the numbers that businesses generally are putting up this earnings season.
You would think so, right, from the reaction that we've been seeing in the stock market. I mean, S&P and Dow are on course for their worst month since 2008.
Why did tech stocks and major indexes tumble despite strong earnings?
And that was at a time when the economy was in a really, really bad way. But actually, the earnings numbers that overall we've been seeing have been pretty strong. And actually, S&P 500 firms are expected to post earnings growth of 20% for the third quarter, which is still a little bit slower than the first half of the year, but around the fastest pace overall. since 2010 or so.
What's going on?
Well, I think if you look at what's been happening throughout the month, you'll see this sort of play out over and over again where we get good news, but it doesn't really seem to calm the stock market down. For instance, Friday we got GDP data and it showed growth expanding at the fastest pace since 2014. But again, stock futures continued to trend lower and we saw the stock market sell off.
Well, while we're on that, you mentioned the GDP. Were investors sort of spooked by the fact that business investment was weak?
I think that is one thing that they definitely picked up on because as we're listening to all these earnings calls come in, one thing that investors are very much aware of is whether investment plans among businesses are going to start stalling or slowing down significantly. in part because of uncertainty related to tariffs. And so the fact that we're seeing business investments starting to slow is definitely not a good sign. Although, of course, consumer spending was shown to be quite strong in the GDP print. And that sort of, I think, helped offset some of those worries a little bit.
Are worries about slowdowns in Europe and China also hurting U.S. stocks? I'm not exactly sure how this is working.
Well, I think a lot of investors that you talk to would blame a couple of things for the stock market's performance this month, and global growth is definitely one of them. The IMF a couple weeks ago actually cut its forecast for 2018 and 2019, and they did cite uncertainty about tariffs as hurting the growth forecast for future years. And with the economy being so connected to not just what's happening domestically, but what's happening abroad, And with corporate profits really depending on the health of sales abroad as well, what happens in China in particular does matter ultimately for U.S. stocks.
Now, I said in the intro that on Friday, stocks resumed their slide after rebounding Thursday from a pretty massive sell-off on Wednesday. I mean, the NASDAQ was down 4.4%.
Wednesday was a brutal sell-off for the market. We saw the S&P and the Dow both erase all of their gains for the year, which was kind of a big moment that we were all looking for. We actually set alerts on our computers for that moment because that's really sort of the point at which you know that this sell-off has really taken off.
When Akane Otani sends an alert, you know something is up. Stocks looked like they were recovering at one point in Friday's session but then slipped back.
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