Wall St inches down as ECB keeps interest rates on hold

The ASX is set to open little changed after the European Central Bank hinted at extending its bond purchases.

Market reaction was muted as the ECB kept rates steady. Picture: AP Photo/Richard Drew.

Corporate earnings drove some of the day’s biggest moves in stocks as major US indexes edged lower.

Across the Atlantic, European stocks gained after the ECB hinted it could extend its bond buying program.

The Australian share market is set for a steady open, with ASX futures down one point at 7.30am (AEDT).

Shares of American Express surged after the card company reported stronger-than-expected earnings and revenue, but it wasn’t enough to keep the Dow Jones Industrial Average in positive territory.

The blue-chip index lost 40 points, or 0.2 per cent, to 18162. The S&P 500 and the Nasdaq Composite fell 0.1 per cent.

Travellers and Verizon Communications together shaved more than 50 points off the Dow industrials.

Travellers declined 5.8 per cent. The property-casualty insurer reported a 24 per cent drop in operating earnings after an unusually strong year-earlier quarter.

Verizon Communications fell 2.5 per cent after the company reported declining revenue and falling subscriber growth, and said it was assessing whether it would renegotiate its acquisition of Yahoo after the internet company’s recently announced data breach.

The telecommunications sector was down the most in the S&P 500, falling 2 per cent. Shares of AT&T fell 1.9 per cent

Financial firms extended their recent rally.

American Express was the biggest gainer in the Dow industrials, rising 9 per cent. Along with its quarterly results Wednesday, AmEx also boosted its earnings guidance for 2017.

Bank of New York Mellon rose 4.5 per cent after it reported higher earnings and revenue.

Financial shares in the S&P 500 have risen 1.7 per cent so far this month.

“Investors are focusing more on earnings and the things that really matter,” rather than speculating about central bank moves and election results, said Randy Frederick, vice president of trading and derivatives at Charles Schwab. “It’s still fairly early on but there’s a very distinct possibility of breaking the earnings recession,” Mr Frederick said.

The second quarter marked the fifth straight period of year-over-year earnings declines for the S&P 500, according to FactSet.

Oil prices cooled a day after touching their highest price in more than a year. US crude for November settled down $US1.17, or 2.3 per cent, to $US50.43 a barrel on the New York Mercantile Exchange after a decline in US crude inventories lifted prices Wednesday.

The year’s rally in oil has been an encouraging sign that corporate earnings could finally be on the rebound, said Ryan Detrick, senior market strategist at LPL Financial.

The Stoxx Europe 600 edged up 0.2 per cent and the euro was down 0.4 per cent against the dollar at $US1.0927 after the European Central Bank’s decision to leave its main interest rates unchanged. Policy makers were widely expected to postpone major policy decisions until early December, when they will have fresh economic forecasts.

ECB President Mario Draghi said an extension of the central bank’s bond-purchase program hadn’t been discussed. He also suggested an abrupt ending to bond purchases was unlikely.

“The tone does suggest that the ECB wants to start weaning the market off sovereign QE,” said Stephen Gallo, European head of currency strategy at BMO Capital Markets. “We will have to see what happens in December,” he said.

On the one hand, credit growth and domestic demands are arguing for continued stimulus, but it is starting to become apparent that there are limits to the effectiveness of the bank’s policies and there are many costs that go with it, he added.

Earlier, Japan’s Nikkei Stock Average rose 1.4 per cent, closing at its highest level since April, as the dollar advanced against the yen.

The WSJ Dollar Index, which measures the US currency against 16 others, was recently up 0.5 per cent. Federal Reserve Bank of New York President William Dudley said late Wednesday that he expected the bank would be able to raise rates by the end of the year.

“The comments reinforced the fact we are in a pretty supportive environment for the dollar,” BMO’s Mr Gallo said. “Barring any major disasters, the Fed is likely to move rates higher in December.”

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