Stocks dip on earnings, rising bond yields

Banks, industrial and tech companies lead the slump.

Rising bond yields and a string of weak company reports and forecasts pushed stocks lower Wednesday as major indexes retreated from their recent record highs. Industrial and technology companies and banks fared the worst.

Companies including telecom giant AT&T, aerospace company Boeing, chipmaker Advanced Micro Devices and credit card issuer Discover Financial Services all gave shaky results, disappointing forecasts, or both. That sent stocks downward, and in early afternoon trading the Dow Jones industrial average fell as much as 190 points, after setting a record the day before. Stocks recovered some of their losses in afternoon trading, but all 11 industry sectors in the Standard & Poor’s 500 index finished the day lower.

Bond yields jumped to seven-month highs after a report from the Commerce Department showed orders for long-lasting manufactured goods and business investment grew in September. That’s good news for the economy, but it actually hurt stocks Wednesday, said Sam Stovall, chief investment strategist at CFRA Equity Research, because it might lead to greater inflation.

“Higher yields (and) a string of positive returns from the market combined with some weak earnings numbers gave investors some reasons to attempt to take profits,” he said. Stocks have risen for each of the last six weeks and repeatedly set new highs.

The S&P 500 shed 11.98 points, or 0.5 percent, to 2,557.15. The Dow Jones industrial average fell 112.30 points, or 0.5 percent, to 23,329.46. The Nasdaq composite sank 34.54 points, or 0.5 percent, to 6,563.89. The Russell 2000 index, which is comprised of smaller-company stocks, dropped 6.94 points, or 0.5 percent, to 1,493.48.

General Electric declined for the third day in a row and finished at a 41/2 year low as it lost 39 cents, or 1.8 percent, to $21.50.

Chipmaker Advanced Micro Devices dropped $1.92, or 13.5 percent, to $12.33 after its fourth-quarter forecasts disappointed investors. Network equipment maker Juniper Networks also issued a mediocre forecast and its stock lost $1.60, or 6.1 percent, to $24.56.

Bond prices fell again. The yield on the 10-year Treasury note rose to 2.44 percent from 2.42 percent. That put pressure on companies that pay large dividends, like telecommunications companies, utilities, and food and beverage makers. Those stocks tend to do better when bond yields are down, as that makes the stocks more attractive to investors who are looking for income.

Many of those companies were hurt by weak results as well. AT&T lost $1.37, or 3.9 percent, to $33.49 after it reported a smaller profit and less revenue than Wall Street expected in the third quarter. Dr Pepper Snapple tumbled $4.19, or 4.7 percent, to $85.52. The 7UP maker’s profit and sales were weaker than expected. It cut its profit forecast for the year because of higher costs as well as expenses from its purchase of energy drink maker Bai Brands.

While rising bond yields and interest rates usually help bank stocks, that was canceled out by disappointing earnings reports. Discover Financial Services lost $2.24, or 3.3 percent, as the credit card issuer and lender set aside more money to cover potential losses on bad loans. Regional bank Huntington Bancshares fell 33 cents, or 2.4 percent.