Wall Street ends lower on mixed earnings, revived US-China trade tensions

• Indexes down: Dow 0.71%, S&P 500 0.53%, Nasdaq 0.93%
• Trump mulls curbs on US software-enabled exports to China
• Netflix drops after earnings miss
• Texas Instruments slips after dour Q4 forecast
• Tesla revenue beats expectations

NEW YORK, Oct 22 (Reuters) – Wall Street closed lower on Wednesday as a wave of mixed earnings, including Netflix’s disappointing results, dampened risk sentiment as investors assessed reports that the Trump administration is considering curbs on exports to China made with U.S. software.All three major U.S. stock indexes extended their losses after the report, with weakness in tech (.SPLRCT), opens new tab and communication services stocks (.SPLRCL), opens new tab weighing the Nasdaq down the most.

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The new export curbs, which would include a wide array of goods ranging from laptops to jet engines, are some of the measures being considered in retaliation against Beijing’s latest round of rare earth export restrictions, and mark yet another escalation of trade tensions between the world’s two largest economies.U.S. President Donald Trump said on Tuesday he thinks he will have a “very successful meeting” with Chinese President Xi Jinping, but also said perhaps the encounter in South Korea later this month will not happen.

The Washington-Beijing trade dispute “has been ongoing and probably will continue until the potential meeting with Trump and Xi,” said Tom Hainlin, a national investment strategist at U.S. Bank Wealth Management in Minneapolis. “Add to that, some tech companies reported some disappointing numbers.”

“But it’s been a pretty good earnings season, and (stocks are) not that far off all-time highs,” Hainlin added. “We wouldn’t tell investors to change their allocations based on a day like today.”

On that front, Netflix (NFLX.O), opens new tab slid 10.1% after the streaming company missed quarterly profit expectations, raising concerns about stretched valuation.Texas Instruments (TXN.O), opens new tab posted lower-than-expected revenue and profit forecasts, dragging the chipmaker’s shares down 5.6%.The Philadelphia Semiconductor Index (.SOX), opens new tab, which has outperformed the broader market this year driven by artificial intelligence fervor, tumbled 2.4%. The chip index touched a record high on Monday.SOX vs SPXTesla (TSLA.O), opens new tab, the first of the “Magnificent Seven” group of artificial intelligence-related momentum stocks to post third-quarter earnings, posted better-than-expected revenue as tax credit expiry drives U.S. sales of electric vehicles. Its shares edged 0.5% lower in extended trading.A trader works on the trading floor at the New York Stock Exchange (NYSE) in New York City, U.S., April 4, 2024. REUTERS/Andrew Kelly/File Photo Purchase Licensing Rights, opens new tabIntuitive Surgical (ISRG.O), opens new tab jumped 13.9% following the company’s third-quarter earnings beat.AT&T (T.N), opens new tab fell 1.9% even as it added more wireless subscribers than expected for the third quarter.

Third-quarter earnings season is well underway, with 86% of the companies that have reported beating Wall Street estimates.

Analysts currently expect third-quarter S&P 500 earnings growth, on aggregate, of 9.3% year-on-year, an improvement over the 8.8% annual growth estimate as of October 1, according to the most recent data from LSEG.

“You earn high valuations by achieving those expectations, and in general companies have so far been meeting or exceeding those expectations,” Hainlin said. “And those that haven’t are not being rewarded by investors with patience.”

The Dow Jones Industrial Average (.DJI), opens new tab fell 334.33 points, or 0.71%, to 46,590.41, the S&P 500 (.SPX), opens new tab lost 35.95 points, or 0.53%, to 6,699.40 and the Nasdaq Composite (.IXIC), opens new tab lost 213.27 points, or 0.93%, to 22,740.40.Of the 11 major sectors of the S&P 500, industrials (.SPLRCI), opens new tab fell the most, with energy (.SPNY), opens new tab enjoying the biggest percentage gain.

Declining issues outnumbered advancers by a 1.47-to-1 ratio on the NYSE. There were 142 new highs and 63 new lows on the NYSE.

On the Nasdaq, 1,362 stocks rose and 3,275 fell as declining issues outnumbered advancers by a 2.4-to-1 ratio.

The S&P 500 posted 14 new 52-week highs and three new lows while the Nasdaq Composite recorded 45 new highs and 116 new lows.

Volume on U.S. exchanges was 24.76 billion shares, compared with the 20.60 billion average for the full session over the last 20 trading days.

Reporting by Pranav Kashyap and Twesha Dikshit in Bengaluru; Editing by Marguerita Choy and Shilpi Majumdar

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