Wall Street grappling with a batch of corporate earnings sent stocks lower on Wednesday amid heightened Treasury volatility, with traders also keeping an eye on the latest geopolitical developments.

The S&P 500 dropped about 1.5 per cent. The Nasdaq 100 saw its worst drop of 2023 as Google’s parent Alphabet Inc.’s disappointing cloud figures outweighed Microsoft Corp.’s sales. A gauge of chipmakers slid 4.1 per cent on Texas Instruments Inc.’s bearish forecasts. Longer-dated U.S. yields outpaced those in shorter-maturity bonds — a process known as “bear steepening.” Oil topped US$85 a barrel after a news report that Israel agreed to delay the ground invasion of Gaza to protect U.S. troops.

Traders are looking for evidence on how companies are coping with high interest rates and whether consumer spending is changing because of inflation.

“The question now turns to earnings as earnings drive stock prices,” said Howard Ward, chief investment officer of Growth Equities and portfolio manager at Gabelli Funds. “This is where the rubber meets the road. A recession would result in higher unemployment, less consumer spending, slower gross domestic product growth and lower earnings, which implies lower stock prices.”

Economists often look to the Treasury market for clues about when a recession might come. Specifically, they examine the so-called yield curve. When it’s “inverted,” as it has been since about mid-2022, that almost always means a recession is looming. But by mid-2023, the curve began to “disinvert” – or steepen in industry parlance — in a way that raised the question of whether the U.S. had managed to dodge a recession or whether one was about to start.

Treasury yields retraced about half of their declines from multiyear highs reached earlier in the week amid expectations that auction size increases will be announced next week. The selloff was reinforced by stronger-than-expected September. Thirty-year U.S. yields climbed 14 basis points to 5.08 per cent, while those on two-year notes were little changed at 5.1 per cent. The yield on 10-year bonds advanced 13 basis points to 4.95 per cent.

Investors also weighed a Bloomberg News report that Semiconductor Manufacturing International Corp. used equipment from ASML Holding NV to manufacture a processor for a Chinese smartphone that alarmed the U.S.

Elsewhere, the Bank of Canada kept interest rates unchanged for a second straight meeting, but left the door open to more tightening even as officials forecast weaker economic growth. The loonie declined.

Corporate Highlights:

Boeing Co. maintained its cash-flow target and said it’s moving ahead with higher aircraft output, reassuring investors even as manufacturing defects forced the company to lower its annual delivery goal for the top-selling 737 model.
Apple Inc. raised prices of its Apple TV+, Arcade gaming and News+ subscription services on Wednesday, in a move that could generate more revenue for its increasingly key services division.

It’s also planning an end-to-end overhaul of its AirPods lineup, refreshing a product category that’s emerged as one of the company’s biggest sellers.

Visa Inc. and Mastercard Inc. are facing a new round of regulatory challenges, with the Federal Reserve proposing lower caps on the fees banks and payment companies can charge merchants when consumers swipe their debit cards at checkout.
T-Mobile U.S. Inc. posted third-quarter profits that beat estimates, buoyed by better-than-expected mobile customer gains.
Short-seller Carson Block said he’s shorting Sunrun Inc. again, part of a short theme he calls the “ESG hustle.”

Sunrun says it fully stands behind its reporting of metrics, including subscribers, in response to the short report from Muddy Waters released earlier Wednesday.

Deutsche Bank AG said it will accelerate payouts to shareholders, seeking to lift the lender’s stock and close a valuation gap with peers. It’s also starting another round of job cuts.
Worldline SA sent a fresh shockwave through Europe’s fintech sector on Wednesday, cutting its sales outlook and warning of economic challenges that pushed its stock down by more than half.

Key events this week:

• European Central Bank interest rate decision; President Christine Lagarde holds news conference, Thursday
• U.S. wholesale inventories, GDP, U.S. durable goods, initial jobless claims, pending home sales, Thursday
• Intel, Amazon earnings, Thursday
• China industrial profits, Friday
• Japan Tokyo CPI, Friday
• U.S. PCE deflator, personal spending and income, University of Michigan consumer sentiment, Friday
• Exxon Mobil earnings, Friday

Some of the main moves in markets:
Stocks

• The S&P 500 fell 1.4 per cent as of 4 p.m. New York time
• The Nasdaq 100 fell 2.5 per cent
• The Dow Jones Industrial Average fell 0.3 per cent
• The MSCI World index fell 1 per cent

Currencies

• The Bloomberg Dollar Spot Index rose 0.3 per cent
• The euro fell 0.2 per cent to $1.0568
• The British pound fell 0.4 per cent to $1.2113
• The Japanese yen fell 0.1 per cent to 150.06 per dollar

Cryptocurrencies

• Bitcoin rose 3.3 per cent to $34,761.32
• Ether rose 1.1 per cent to $1,790.6

Bonds

• The yield on 10-year Treasuries advanced 12 basis points to 4.94 per cent
• Germany’s 10-year yield advanced six basis points to 2.89 per cent
• Britain’s 10-year yield advanced seven basis points to 4.61 per cent

Commodities

• West Texas Intermediate crude rose 1.8 per cent to $85.26 a barrel
• Gold futures rose 0.3 per cent to $1,992 an ounce