Wall St closes lower as bonds drop

The ASX is set to rally this morning even after Wall St finished slightly lower as investors worried about inflation.

Investors are on edge watching a sell-off in government bonds. Picture: AP Photo/Richard Drew.

US stocks fell as a sell-off in government bonds hit yield-sensitive sectors such as real estate and utilities.

But European stocks were little changed after Britain’s GDP figures beat forecasts despite the effect of the Brexit vote.

The Australian share market is set to rally this morning, with ASX futures up 28 points at 7.30am (AEDT).

Meanwhile, reports from roughly half of the S&P 500 suggest earnings may grow after five quarters of declines. But some analysts said earnings gains haven’t been enough to prompt investors to make big moves ahead of events such as the US presidential election or a possible interest-rate increase before year end.

“People are a little bit on hold,” said Lisa Kopp, head of traditional investments at US Bank Wealth Management. “They’re recognising that the economy continues to chug along but there’s uncertainty about what comes next.”

Data on US growth is due Friday, with gross domestic product projected to have advanced at a 2.5 per cent annualised pace in the third quarter, according to economists surveyed by The Wall Street Journal.

The Dow Jones Industrial Average fell 30 points, or 0.2 per cent, to 18170. The S&P 500 fell 0.3 per cent, and the Nasdaq Composite lost 0.65 per cent.

Government bonds fell broadly, with the yield on the 10-year US Treasury note rising to 1.843 per cent from 1.790 per cent Wednesday.

Real-estate stocks in the S&P 500, which tend to do better when bond yields are low and investors want dividends and income, declined 2.4 per cent. The utilities and consumer-staples sectors both fell 0.5 per cent.

The WSJ Dollar Index, which measures the dollar against a basket of major currencies, rose 0.4 per cent. The index is up nearly 3 per cent in October as expectations for a US interest-rate increase by December have grown.

Investors were also analysing a fresh set of corporate earnings Thursday, hoping to avoid a sixth consecutive quarter of declines from the year-earlier period for the S&P 500. That would be the longest such stretch of earnings declines in FactSet records going back to 2008.

Shares in Ford Motor fell 1.2 per cent after the automaker reported a drop in earnings. Dow Chemical shares advanced 1.5 per cent after the company said revenue rose in the latest quarter.

Twitter reported another quarter of slowing revenue growth and said it would cut 9 per cent of its global workforce. Shares rose 0.6 per cent.

Deals also drove prices Thursday. CenturyLink and Level 3 Communications were among the biggest gainers in the S&P 500 after The Wall Street Journal reported the telecommunications companies were in talks to merge. Level 3 Communications rose 11 per cent, while CenturyLink climbed 9.7 per cent.

Shares in Qualcomm gained 2.8 per cent after the company, which is best known for designing smartphone chips, agreed to buy NXP Semiconductors for $US39 billion.

Earnings also moved shares in Europe, where Deutsche Bank rose 0.6 per cent after the embattled German lender posted an unexpected profit and set aside more cash to cover litigation costs.

Shares in Barclays gained 4.8 per cent after the lender reported a roughly flat net profit in the third quarter compared with the previous year as well as a bump in fixed-income revenue.

“Earnings season [is] in full flow and the numbers are not that bad,” said Jeroen Blokland, a senior portfolio manager at asset manager Robeco. Mr Blokland said he may close an underweight position in US stocks if earnings continue to improve.

Australia’s S&P ASX 200 fell 1.2. per cent, while Japan’s Nikkei Stock Average slipped 0.3 per cent.

Dow Jones