S&P 500 falls by most in 3 weeks as investors digest earnings

Wall Street finished in the red on Wednesday following more subdued trading in global stock markets as investors digested a fresh batch of earnings and Donald Trump damped hopes of a swift resolution to trade talks with China.

Wall Street’s S&P 500 shed 0.65 per cent to 2,984.42, slipping from record highs and notching its steepest one-day drop in three weeks. Industrials proved the biggest decliners, down 2.2 per cent, while energy fell 1.2 per cent. Those drops were only partially offset by a 0.4 per cent rise in utilities.

Disappointing results and an outlook cut from rail operator CSX prompted a more than 10 per cent decline in its shares and sent an index of the biggest US railroad stocks down by more than 7 per cent — their worst day since 2008. The results suggested the slowdown in the US economy was starting to affect its rail operators.

Adding to the caution were remarks from Mr Trump that the US still has a long way to go before reaching a trade accord with China.

Investors turned to the safety of Treasuries, with the yield on the US 10-year slipping 5.2 basis points to 2.05 per cent and that on the two-year down 2.6 basis points to 1.823 per cent. Yields move inversely to price.

Meanwhile, the Federal Reserve’s Beige Book — the central bank’s anecdotal report on the domestic economy — showed economic activity “continued to expand at a modest pace” and the outlook is for “continued modest growth, despite widespread concerns about the possible negative impact of trade-related uncertainty”.

European stock indices also endured a lacklustre session, with Frankfurt’s Xetra Dax 30 down 0.7 per cent and the Stoxx 600 off by 0.4 per cent. London’s FTSE 100 was down 0.6 per cent after its rally over the previous session, helped by the pound’s plight, left it looking a little more exposed.

Sterling was calmer after UK inflation data met forecasts, helping soothe nerves around the currency, which had fallen further in earlier trade.

The pound fell nearly 1 per cent to a new two-year low on Tuesday after Tory leadership candidates Boris Johnson and Jeremy Hunt hardened their Brexit stances. Investors are tracking a growing risk the next British prime minister could take the UK out of the EU without a deal within months, raising the prospect of severe disruption to the economy.

The relative safety of UK government debt chimed with the wider mood, drawing investors in and pushing yields lower. Benchmark 10-year gilt yields were down 0.6 basis points to 0.753 per cent.

Major bourses in Asia slipped, with the Kospi in Seoul suffering the steepest fall of almost 1 per cent. Hong Kong’s Hang Seng and mainland China’s CSI 300 ticked down 0.1 per cent, as did Tokyo’s Topix.

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