US STOCKS-Nasdaq, S&P 500 fall, dragged by communications services

Reuters

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 (Updates prices, adds analyst comment)
    By Shreyashi Sanyal, Devik Jain and Sinéad Carew
    Oct 22 (Reuters) - The S&P 500 and Nasdaq closed lower on
Friday as disappointing quarterly reports from Snap Inc  SNAP.N 
and Intel Corp  INTC.O  dragged down the communications and
technology sectors and investors turned skittish as Federal
Reserve Chair Jerome Powell discussed stimulus tapering. 
    After hitting record highs in morning trading the Dow and
the S&P 500 lost ground in a choppy session. 
    Stocks pulled back further while Powell was speaking but
went on to pare losses after hitting a late morning low. Powell
said the U.S. central bank was "on track" to begin reducing its
purchases of assets.  urn:newsml:reuters.com:*:nW1N2QN003
    "Powell's continuing on his data-driven approach and didn't
appear incrementally more hawkish," said Sean Sun, portfolio
manager at Thornburg Investment Management in Santa Fe, New
Mexico.
    But Sun said investors were "really anxious" about weaker
than expected earnings at Snap, which attributed some weakness
in its advertising business to global supply-chain disruptions
and labor shortages that caused brands to pull back on their
advertising spending.  urn:newsml:reuters.com:*:nL1N2RH2RW
    This caused shareholders to exit other communications
companies such as Facebook Inc  FB.O  and Twitter Inc  TWTR.N ,
which also depend heavily on advertising revenue. 
    As a result the S&P's communications services index
 .SPLRCL  was the biggest drag on the benchmark index during the
session.
    "Consumers want to open their wallets and buy things but
they can't if goods are stuck on container ships. And
advertisers aren't going to advertise things they can't sell,"
said Sun, noting that growth stocks were down in sympathy.
    "Investors are now thinking about risk reward and valuations
in growth stocks leave less room for disappointment."
    Intel shares also tumbled after the company missed
third-quarter sales expectations, while its chief executive
officer pointed to shortages of chips holding back sales of its
flagship processors.  urn:newsml:reuters.com:*:nL4N2RH45C
    According to preliminary data, the S&P 500  .SPX  lost 4.80
points, or 0.11%, to end at 4,544.98 points, while the Nasdaq
Composite  .IXIC  lost 125.50 points, or 0.83%, to 15,090.20.
The Dow Jones Industrial Average  .DJI  rose 74.17 points, or
0.21%, to 35,677.25.
    Still, the benchmark S&P 500 index, which boasted a record
closing high on Thursday, looked set for its third straight week
of gains.     
    Among the S&P's major sectors, consumer discretionary
 .SPLRCD  was a drag as Amazon.com Inc  AMZN.O  fell and Intel
helped push down the high-profile technology index  .SPLRCT .  
    The financial sector  .SPSY  was helped however by strong
gains in American Express Co  AXP.N  after it beat profit
estimates for the fourth straight quarter.  urn:newsml:reuters.com:*:nL4N2RI2KP
    Analysts increased their expectations for S&P 500 earnings
growth for the third quarter, forecasting an increase of 34.8%
year-on-year, up from an expected 31.9% rise at the beginning of
the week, according to data from Refinitiv. 
    But investors are already looking beyond the impressive
earnings numbers, according to Brad McMillan, chief investment
officer for Commonwealth Financial Network, an independent
broker-dealer in Waltham, Massachusetts.
    "The real question around whether we can push higher is
going to be whether economy is going to get better, because the
earnings are backwards-looking," McMillan said.
    Data showed U.S. business activity accelerated in October,
as COVID-19 infections subsided, though labor and raw material
shortages held back manufacturing.  urn:newsml:reuters.com:*:nZON0045QJ

 (Reporting by Sinead Carew in New York and Shreyashi Sanyal and
Devik Jain in Bengaluru
Editing by Shounak Dasgupta and Matthew Lewis)
 ((Sinead.carew@thomsonreuters.com))

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