U.S. stocks fell Thursday as earnings results flowed in from major companies, and after the European Central Bank (ECB) delivered a monetary policy decision that was less accommodative than markets had hoped.
The S&P 500 (^GSPC) fell 0.53%, or 15.89 points, as of market close. The Dow (^DJI) dropped 0.47%, or 128.99 points, as 3% declines in shares of Boeing and Dow Inc. weighed on the index. The Nasdaq (^IXIC) fell 1%, or 82.96 points, pulling back from a record high Thursday.
Treasury yields in the U.S. recovered, while government bond yields in Europe held lower after the ECB Thursday morning announced its decision to keep its benchmark interest rate unchanged at 0.00%, despite earlier optimism for further stimulus from the central bank.
However, the central bank added in its statement that it would keep rates “at present or lower levels at least through the first half of 2020, and in any case for as long as necessary to ensure the continued sustained convergence of inflation to its aim over the medium term.”
The mention for rates at “lower levels” was an update to language from the last policy statement in June, hinting at the possibility for a future rate cut.
The decision comes after ECB President Mario Draghi said last month that the central bank was prepared to announce further stimulus measures in the absence of an economic improvement of the euro zone economy. With data including Germany’s manufacturing Purchasing Managers’ Index (PMI) falling further in July, traders have come to expect even easier monetary policy. The yield on German benchmark bunds recovered slightly to -0.371% Thursday morning but held near record lows.
The U.S. Federal Open Market Committee meets next week and delivers its monetary policy decision July 31. As of Thursday afternoon, markets priced in a 100% probability of at least a 25 basis point cut to key borrowing rates, including a 21.4% probability of a more aggressive 50 basis point cut, according to CME Group.
Earnings update – Facebook, 3M top expectations; Tesla posts wide loss
Facebook (FB) reported better-than-expected sales and earnings in results delivered Wednesday afternoon. However, the company also disclosed that the Federal Trade Commission had opened an antitrust investigation into the company. Despite increasing regulatory oversight and lingering concerns over privacy, the social media giant has continued to add troves of users to its platforms, which also include Instagram and WhatsApp. Daily active users (DAUs) climbed 8% over last year to 1.59 billion, while monthly active users (MAUs) rose by the same magnitude to 2.41 billion as of June 30.
Tesla’s (TSLA) results after market close were less impressive compared to analyst estimates, with the electric car-maker posting a wider-than-expected quarterly net loss even after the company reported record deliveries during the same period. Tesla’s adjusted loss totaled $1.12 per share, versus a 31 cent loss anticipated by consensus analysts polled by Bloomberg. The company reaffirmed its guidance to see full-year deliveries of between 360,000 to 400,000. CEO Elon Musk also announced during a call with investors Thursday that Tesla co-founder and Chief Technical Officer JB Straubel would be leaving the company and moving to an advisory role.
3M (MMM), the maker of Post-It Notes and other assorted goods, posted results Thursday morning that topped Wall Street’s expectations as it reported a smaller-than-expected decline in profit over last year. The company, a manufacturing bellwether looked to for indications of global growth, reiterated its full-year adjusted earnings forecast to be in the range of $9.25 to $9.75 per share. In its second quarter, organic local currency sales grew in the U.S. and in its Latin America and Canada segment, but fell by less than 1% in Asia Pacific, and by 3.6% in its Europe, the Middle East and Africa segment.
Southwest Airlines (LUV) posted quarterly adjusted earnings that beat consensus expectations, but simultaneously announced several major operational changes relating to the ongoing grounding of Boeing’s (BA) 737 Max aircraft. Southwest, which had 34 Max jets in its fleet as of March, said it would extend its Max-related flight schedule adjustments through Jan. 5. It also reported that it would cease operations at Newark Liberty International Airport and consolidate its presence at LaGuardia Airport in New York starting Nov. 3, as part of the company’s plan to “mitigate damages and optimize our aircraft and resources.”
Emily McCormick is a reporter for Yahoo Finance. Follow her on Twitter: @emily_mcck
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