Stocks Slip as Bank Earnings Reports Roll In

Analysts say investors are complacent as they face the start of the third-quarter earnings season. There are also questions over whether Congress and the White House can reach a middle ground on further stimulus to prop up an economy struggling to recover from the coronavirus pandemic.

With few fresh reasons to push stocks up higher ahead of the November election, the continuing rally appears to be on pause. Earnings, including those on Wednesday, have been a mixed bag, with investors punishing companies that missed estimates more severely than they rewarded those that beat projections.

Talks between Congress and the White House are ongoing, but hopes for a deal ahead of the election are fading. Besides that, investors who had been hoping for a coronavirus vaccine got a dose of bad news Tuesday after

Johnson & Johnson

and

Eli Lilly

halted coronavirus vaccine trials.

“It’s possible the election becomes the clearing event and people will have more clarity on the nearer term and on fiscal stimulus prospects,” said David Lefkowitz, head of equities Americas at UBS Financial Services. Until then, trading is likely to be choppy as it has been in recent sessions, he added.

Still, some investors remain focused on the market’s prospects past the election, pointing to an expected rebound in corporate profits and the likelihood that at least one of the health-care companies still vying to create a vaccine or therapeutic to treat the coronavirus will succeed.

“The uphill climb from here is likely to be more gradual, but we remain convinced that the next 15 months will ultimately bring new record highs,” said Scott Wren, a senior global market strategist at the

Wells Fargo

Investment Institute, in a note to clients.

Wells Fargo has a midpoint target of 3850 for the S&P 500 by the end of next year, a roughly 9% gain from current levels.

On Wednesday, all three major stock indexes were in the red in recent trading. The Dow Jones Industrial Average fell nearly 200 points, or 0.7%, to 28492, while the S&P 500 declined 0.8%. The Nasdaq Composite slid 1.1%.

Losses accumulated after technology stocks reversed their earlier gains, undercutting a crucial leg of the stock market.

Financial stocks broadly fell after some mixed earnings reports. Shares of Goldman Sachs rose just 0.7% after the bank reported sharply higher profits for the third quarter.

Bank of America

and Wells Fargo both reported profit declines, sending shares of those banks down 4.1% and 5.2%, respectively.

The stock market’s best sector, energy, did little to help the situation. The segment rose 1.9% in the S&P 500 after a report of a possible deal between energy producers ConocoPhillips and rival

Concho Resources.

The gains don’t do much for the S&P 500 though, as repeated declines over the last several years have diminished energy’s influence.

Overseas, the pan-continental Stoxx Europe 600 edged lower by 0.1%

In Asia, major benchmarks were mixed. The Shanghai Composite Index closed down 0.6%. Japan’s Nikkei 225 edged up 0.1%.

Write to Caitlin Ostroff at [email protected] and Michael Wursthorn at [email protected]