US stocks fell on Wednesday, with the Dow Industrials and S&P 500 indexes suffering their worst day in seven weeks, on a batch of soft quarterly earnings and a rise in bond yields.
Benchmark US 10-year note yields hit a seven-month high of 2.475 per cent, buoyed by economic data, recent optimism over progress on tax reform by US President Donald Trump's administration and anticipation of a nominee to head the Federal Reserve.
Equities pared losses as yields retreated, following a Fox Business interview with Trump in which he said he was still considering keeping current Fed Chair Janet Yellen in the position. The 10-year was last down 9/32 in price to yield 2.4371 per cent.
“It is possible the market may be taking some solace that Yellen is still in the mix,” said Mike Beale, senior managing director at US Bank Private Wealth Management in Portland, Oregon.
“The market may be saying, maybe one of the more hawkish, (John) Taylor or (Kevin) Warsh, is off the table.”
Low interest rates have been a driving factor in the 8-year bull market, with investors pushed into equities as other lesser-yielding instruments are viewed as unattractive by comparison.
Earnings season so far has been largely positive, with 72.1 per cent of the 165 S&P 500 companies that have reported to date topping expectations, matching the average for the past four quarters. However, with US indexes at record levels, investors have scrutinised earnings to see if they justify stretched valuations.
Also weighing on sentiment: President Trump and the US House of Representatives' top tax law writer reopened the door on Wednesday to changes in the 401(k) retirement savings programme, just days after Trump seemed to rule out such a step. The debate could present another hurdle to a tax reform deal.
Downbeat earnings from AT&T sent shares in the United States' second-largest wireless carrier down 3.9 per cent, pulling down other telecom stocks Verizon and CenturyLink
Boeing , off 2.8 per cent, surprised investors by revealing a $329-million charge for its troubled KC-46 aerial refueling tanker programme in quarterly results.
The Dow Jones Industrial Average fell 112.3 points or 0.48 per cent to end at 23,329.46, the S&P 500 lost 11.98 points or 0.47 per cent to 2,557.15 and the Nasdaq Composite dropped 34.54 points or 0.52 per cent to 6,563.89.
Selling was broad, with all 11 major S&P sectors in negative territory. Also, for the first time since late August, more New York Stock Exchange stocks made 52-week lows than highs.
AMD shares tumbled 13.5 per cent after the chipmaker flagged competitive pressures with a forecast that pointed to a drop in revenue in the fourth quarter from the third.
Chipotle plunged 14.6 per cent after the burrito chain posted disappointing sales and earnings, adding to a raft of bad news for the company this year.
Declining issues outnumbered advancing ones on the NYSE by a 2.96-to-1 ratio; on Nasdaq, a 2.07-to-1 ratio favored decliners. About 7.3 billion shares changed hands in U.S. exchanges, well above the 5.91 billion daily average over the last 20 sessions.