Stocks, Treasury yields retreat amid mixed earnings, economic data

By Lawrence Delevingne

(Reuters) -Shares around the world fell and U.S. Treasury yields retreated on Thursday as investors digested mixed U.S. economic and corporate signals.

The U.S. economy grew faster than expected in the third quarter, buoyed by robust consumer spending amid a resilient labor market and again defying dire warnings of a recession. But business investment softened as outlays on equipment declined and the boost from the construction of factories faded.

Pushing down Treasury yields was the release of weaker-than-expected U.S. inflation and disposable income data, supporting market sentiment that interest rates are at, or near, their peak. The benchmark 10-year yield last stood at 4.849%, down 10.4 basis points on the day, a pullback from 5.021%, the highest level since 2007 hit earlier in the week. [US/]

Quincy Krosby, chief global strategist at LPL Financial in Charlotte, said U.S. economic growth has prompted market concerns that the Fed may need to increase interest rates again before the end of the year to quell inflation.

"The Fed's job isn't done and it does not appear that higher interest rates are doing the job for them," Krosby said in an email.

SHARES HIT

The Dow Jones Industrial Average fell 0.76%, the S&P 500 lost 1.18% and the Nasdaq Composite dropped 1.76%.

Meta Platforms fell about 3.7% on a weaker outlook, while megacaps Tesla and Microsoft fell 3.1% and 3.75% respectively, dragged by high interest rates.

Those declines came after Alphabet shares logged their worst session since March 2020, dropping 9.5%, as investors were disappointed with growth stalling in its cloud division. Amazon.com forecast fourth-quarter revenue below analysts' expectations after markets closed on Thursday.

Ken Mahoney, CEO of Mahoney Asset Management in Montvale, New Jersey, said that the message from big technology companies was that they are still experiencing growth, but at a slower rate, and recent price levels were "very hard to justify" with a current 10-year Treasury rate near 5%.

"Market participants were thinking that they'd be getting a treat by now, not a trick," he said in an email.

In Europe, the European Central Bank broke the longest streak of interest rate hikes in its 25-year history on Thursday, leaving its main rate at a record high of 4.0%, and saying the latest data continued to point to inflation slowly coming down to its 2% target.

The euro was little changed on the day, while Europe's broad STOXX index was down about 0.5%, near a seven-month low hit earlier in the week.

European banks were the big earnings story on Wednesday, with Standard Chartered down 12.4% after the group announced its third-quarter profit unexpectedly plunged by a third. Shares in BNP Paribas also fell, down 2.6% after results. [.EU]

MSCI's gauge of stocks across the globe shed 1.1%.

In currency markets, the dollar index edged up to 106.6, driven by the higher yields, and the yen weakened past 150 per dollar, a level that has put traders on guard for intervention to support the Japanese currency.

Oil prices slipped after a rise in U.S. crude stockpiles and due to the stronger dollar, though the war in the Middle East loomed large in traders' minds.

U.S. crude was down 2.26% at $83.46 per barrel and Brent was at $88.18, down 2.16% on the day. [O/R]

Spot gold added 0.3% to $1,985 an ounce, near a five-month high. [GOL/]

(Reporting by Lawrence Delevingne in Boston, Xie Yu in Hong Kong and Alun John in London; Editing by Marguerita Choy, David Holmes, Giles Elgood and Jonathan Oatis)