By Lewis Krauskopf, Sruthi Shankar and Ankika Biswas
(Reuters) – The S&P 500 edged lower on Thursday after disappointing quarterly reports from companies including Tesla and AT&T, while a drop in bond yields helped mitigate equity declines as investors sought clarity on the path of interest rates.
Tesla shares tumbled 9.5% after the electric vehicle maker posted its lowest quarterly gross margin in two years, as it slashed prices aggressively. AT&T shares dropped 10.4% after the wireless carrier missed market estimates for first-quarter revenue and free cash flow.
Treasury yields fell after soft economic data, including a moderate weekly increase in the number of Americans filing new claims for unemployment benefits.
“If yields fall, all else being equal on a relative basis it makes equities on the day look a little bit better,” said Sameer Samana, senior global market strategist at Wells Fargo Investment Institute.
“It’s mainly a market looking for direction,” Samana said. “Nothing on the data or earnings front today was enough to push things significantly in one direction or another.”
The Dow Jones Industrial Average fell 26.11 points, or 0.08%, to 33,870.9, the S&P 500 lost 6.61 points, or 0.16%, to 4,147.91 and the Nasdaq Composite dropped 8.11 points, or 0.07%, to 12,149.11.
Major indexes have been largely stable in the early stages of a first-quarter earnings season that investors expect to show tepid results.
Analysts have largely retained last week’s expectations of a near-5% year-on-year fall in quarterly profits at S&P 500 companies, according to Refinitiv data.
In other earnings news, American Express Co profit missed Wall Street estimates and its shares fell 2.1%, weighing on the Dow.
Shares of Lam Research rose 8.5% after the chip-making equipment supplier’s revenue topped estimates, while shares of D.R. Horton rose 6.1% after the homebuilder forecast full-year revenue above estimates.
Investors are assessing the path for interest rates, and many expect a slowing U.S. economy could lead the Federal Reserve to start cutting rates later this year.
Markets were focused on a bevy of Fed officials speaking at the end of the week ahead of the central bank’s meeting early next month, when investors widely expect a 25 basis point hike.
Cleveland Fed President Loretta Mester said more rate hikes are ahead but also said the aggressive move to boost borrowing costs to quash high inflation is nearing its end.
Adding to worries, the cost of insuring exposure to U.S. sovereign debt rose to the highest level in over a decade as investors fretted about the U.S. government debt ceiling.
Declining issues outnumbered advancing ones on the NYSE by a 1.38-to-1 ratio; on Nasdaq, a 1.48-to-1 ratio favored decliners.
The S&P 500 posted 22 new 52-week highs and 3 new lows; the Nasdaq Composite recorded 45 new highs and 113 new lows.
(Reporting by Lewis Krauskopf in New York, Sruthi Shankar and Ankika Biswas in Bengaluru; Additional reporting by Vansh Agarwal; Editing by Arun Koyyur, Vinay Dwivedi and David Gregorio)