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Negative Reaction To Tech Earnings Leads To Sharp Pullback On Wall Street

Following the rebound seen in the previous session, stocks pulled back sharply during trading on Friday. The major averages all moved to the downside on the day, with the tech-heavy Nasdaq showing a particularly steep drop.

The major averages regained ground going into the close but remained in negative territory. While the Nasdaq plunged 274.00 points or 2.5 percent to 10,911.59, the S&P 500 tumbled 40.15 points or 1.2 percent to 3,269.96 and the narrower Dow fell 157.51 points or 0.6 percent to 26,501.60.

With the pullback on the day, the Dow slid to a three-month closing low, while the Nasdaq and the S&P 500 dropped to their lowest closing levels in over a month.

The major averages also posted steep losses for the week. The Dow plummeted by 6.5 percent, and the Nasdaq and S&P 500 plunged by 5.5 percent and 5.6 percent, respectively.

The sharp pullback on Wall Street partly reflected a negative reaction to earnings news from a number of big-name tech companies.

Shares of Apple (AAPL) slumped by 5.6 percent after the tech giant reported better than expected fiscal fourth quarter earnings but a steep decline in iPhone sales. Apple also failed to provide guidance for the current quarter.

Social media giant Facebook (FB) also came under pressure after reported third quarter results that exceeded estimates but warning of “a significant amount of uncertainty” looking ahead.

Shares of Amazon (AMZN) also moved notably lower after the online retail giant reported third quarter results that beat estimates but provided a disappointing forecast for operating income in the fourth quarter.

Twitter (TWTR) also posted a steep loss after the social media giant reported third quarter earnings that exceeded estimates but weaker than expected user growth.

On the other hand, shares of Alphabet (GOOGL) moved significantly higher after the Google parent reported third quarter results that beat analyst estimates on both the top and bottom lines.

Lingering concerns about the recent spike in coronavirus cases also weighed on Wall Street along with uncertainty about next week’s presidential election.

Meanwhile, traders shrugged off some upbeat economic data, with a report from the Commerce Department showing personal income rebounded by more than anticipated in the month of September.

The Commerce Department said personal income climbed by 0.9 percent in September after tumbling by a revised 2.5 percent in August.

Economists had expected personal income to rise by 0.4 percent compared to the 2.7 percent nosedive originally reported for the previous month.

The report also showed a bigger than expected increase in personal spending, which surged up by 1.4 percent in September. Spending was expected to match the 1.0 percent jump seen in August.

A separate report from the University of Michigan showed consumer sentiment improved slightly more than initially estimated in the month of October.

The report showed the consumer sentiment index for October was upwardly revised to 81.8 from the preliminary reading of 81.2. Economists had expected the reading to be unrevised.

With upward revision, the consumer sentiment index is a bit further above the final September reading of 80.4.

Sector News

Retail stocks showed a substantial move to the downside on the day, with the Dow Jones U.S. Retail Index plunging by 3.4 percent to its lowest closing level in over a month.

Considerable weakness was also visible among software stocks, as reflected by the 1.9 percent slump by the Dow Jones U.S. Software Index. The index also fell to a one-month closing low.

Semiconductor stocks also saw significant weakness on the day, dragging the Philadelphia Semiconductor Index down by 1.6 percent.

Housing, networking and natural gas stocks also saw notable weakness, while gold and oil services stocks bucked the downtrend.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region moved notably lower during trading on Friday. Japan’s Nikkei 225 Index and China’s Shanghai Composite Index both tumbled by 1.5 percent, while South Korea’s Kospi plunged by 2.6 percent.

Meanwhile, the major European markets turned in a mixed performance on the day. While the French CAC 40 Index climbed by 0.5 percent, the U.K.’s FTSE 100 Index edged down by 0.1 percent and the German DAX Index fell by 0.4 percent.

In the bond market, treasuries moved to the downside over the course of the session. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, rose by 2.5 basis points to 0.860 percent.

Looking Ahead

The presidential election is likely to be in the spotlight next week, although the final results may not be known on election night.

Traders are also likely to keep an eye on the monthly jobs report as well as the Federal Reserve’s latest monetary policy decision.

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