US STOCKS-Nasdaq, S&P 500 end lower, dragged down by communications services

Reuters

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    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  put pressure on the communications and
technology sectors and investors turned skittish as Federal
Reserve Chair Jerome Powell discussed stimulus tapering. 
    The Dow managed to end the day with a record closing high
for the first time since Aug. 16, but all three indexes had lost
ground in morning trading while Powell was speaking but went on
to pare losses in a choppy session. 
    Powell said the U.S. central bank was "on track" to begin
reducing its purchases of assets.  urn:newsml:reuters.com:*:nW1N2QN003
    Sean Sun, portfolio manager at Thornburg Investment
Management in Santa Fe, New Mexico said Powell "didn't appear
incrementally more hawkish." 
    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
    Snap shares fell more than 25% and its report caused
shareholders to exit bigger advertising dependent communications
companies such as Facebook Inc  FB.O  and  Twitter Inc  TWTR.N ,
which both closed down around 5%. 
    As a result the S&P's communications services index
 .SPLRCL  was the biggest drag on the benchmark index.
    "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 tumbled almost 12% after the computer chip
maker 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
    The Dow Jones Industrial Average  .DJI  rose 73.94 points,
or 0.21%, to 35,677.02, the S&P 500  .SPX  lost 4.88 points, or
0.11%, to 4,544.9 and the Nasdaq Composite  .IXIC  dropped
125.50 points, or 0.82%, to 15,090.20.
    Still, all three indexes notched a third straight week of
gains for the first time since early July, with the S&P adding
1.6% for the week while the Dow climbed 1.1% and the Nasdaq
advanced by 1.3%. 
    Among the S&P's major sectors on Friday, 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 , which rose 5.4% 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 some investors were 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
    Advancing issues outnumbered declining ones on the NYSE by a
1.08-to-1 ratio; on Nasdaq, a 1.30-to-1 ratio favored decliners.
    The S&P 500 posted 88 new 52-week highs and no new lows; the
Nasdaq Composite recorded 142 new highs and 137 new lows.
    On U.S. exchanges 11.03 billion shares changed hands
compared with the 10.38 billion moving average for the last 20
seconds. 

 (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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