Wall Street equities fall with interest rates, earnings in focus

US stock market: Wall Street's main indexes closed lower on Monday after Federal Reserve Chair Jerome Powell pushed back firmly against speculation that rate cuts would be imminent, while investors assessed a mixed bag of US earnings reports.

In an interview aired on Sunday, Powell said more evidence on a sustainable downtrend in inflation was needed to warrant lower rates, while Minneapolis Fed President Neel Kashkari wrote in an essay published on Monday that a resilient economy could defer rate cuts for some time.

Fresh data from the Institute for Supply Management showed the US services sector's growth picked up in January, with a measure of input prices rising to an 11-month high.
This added to doubts about rate cuts, already kindled by Friday's data, which signaled the labor market's resilience in the face of tight credit conditions.

Adding pressure was US Treasuries, with 10-year yields up for second day straight and hitting their highest level since late January.

"Chairman Powell threw a wet blanket over trading today, taking any chance of a March rate cut off the table," said Jack Ablin, chief investment officer at Cresset Capital in Chicago. But with all three of Wall Street's major indexes paring losses as the session wore on, Ablin said investors are likely conflicted since positive economic data supports higher rates.

"Equity investors are torn between the higher rates and the stronger growth. They're no longer sure that good is bad news," he said. "Stronger growth on the economic front gives the Fed more flexibility to keep rates higher and know they're not going to kill the economy but still have a potent weapon against inflation."

And since Monday's decline followed record high closing levels in the benchmark S&P 500 (.SPX), opens new tab and the blue-chip Dow (.DJI), opens new tab on Friday, Carol Schleif, chief investment officer at BMO family office in Minneapolis, Minnesota, saw it as a potential opportunity for investors who had been on the sidelines.

"The market had gotten way out over its skis, especially coming out of November, December," Schleif said, adding that she was "not viewing this as the start of a major pullback." The Dow Jones Industrial Average (.DJI), opens new tab fell 274.30 points, or 0.71 per cent , to 38,380.12, the S&P 500 (.SPX), opens new tab lost 15.80 points, or 0.32 per cent, to 4,942.81 and the Nasdaq Composite (.IXIC), opens new tab lost 31.28 points, or 0.20 per cent, to 15,597.68.

The S&P 500 materials sector (.SPLRCM), opens new tab was the biggest sector decliner, ending down 2.5 per cent, dragged down by a 15.6 per cent decline in Air Products (APD.N), opens new tab after the industrial gas manufacturer forecast 2024 profit below estimates.\

Of 11 major S&P sectors, only two gained ground with technology (.SPLRCT), opens new tab adding 0.6 per cent and a 0.3 per cent gain in healthcare (.SPXHC), opens new tab. Results were in from nearly half of the S&P 500 firms and fourth-quarter earnings estimates were improving sharply, with about 80 per cent of the reports beating expectations, according to LSEG data on Friday.

"Mostly earnings season has been pretty mixed bag. It's been more stock specific than industry specific," said BMO's Schleif. Caterpillar (CAT.N), opens new tab closed up 2 per cent after hitting a record high following its report of a higher quarterly profit, while Estee Lauder (EL.N), opens new tab shares surged 12 per cent as the MAC lipstick maker aims to cut about 3 per cent to 5 per cent of its workforce.

Boeing (BA.N), opens new tab shares slipped 1.3 per cent after it said a new quality glitch in some 737 MAX planes would delay some deliveries. Tesla (TSLA.O), opens new tab shares closed down 3.7 per cent after touching its lowest level since May during the session. Piper Sandler slashed the stock's price target. Nvidia (NVDA.O), opens new tab hit a fresh record high following a price-target raise by Goldman Sachs and closed up 4.8 per cent.

Catalent (CTLT.N), opens new tab shares soared 9.7 per cent on Novo Nordisk parent (NOVOb.CO), opens new tab Novo Holdings' plans to buy the contract drugmaker in an $11.5-billion all-cash deal. Declining issues outnumbered advancers by a 4.2-to-1 ratio on the NYSE. There were 142 new highs and 124 new lows on the NYSE.

On the Nasdaq 1,167 stocks rose and 3,136 fell as declining issues outnumbered advancers by about a 2.7-to-1 ratio. The S&P 500 posted 29 new 52-week highs and 11 new lows while the Nasdaq recorded 86 new highs and 209 new lows. On US exchanges 10.99 billion shares changed hands compared with the 11.58 billion moving average for the last 20 sessions.