MARKET SNAPSHOT

U.S. stocks retreated from record highs after a selloff in chip stocks. Oil futures fell to their lowest in about two weeks after reports that Israel will not attack key oil facilities in Iran. Treasury yields declined for a second day as traders reacted to a weaker-than-expected manufacturing reading from the New York Fed and lower oil prices. Gold rose for the third time in four sessions.

MARKET WRAPS

EQUITIES

A selloff in chip stocks weighed on major indexes after the Dutch chip-equipment manufacturer ASML noted growing caution among its customers and said sales this year could come at the lower end of previous forecasts.

ASML shares fell roughly 16% in Amsterdam, highlighting sluggish demand for semiconductors outside the realm of artificial-intelligence computing. Shares of chipmakers including Nvidia, Intel, Advanced Micro Devices and Broadcom also declined.

Those moves dragged on the tech-heavy Nasdaq Composite, which fell 1%. The Dow Jones Industrial Average and the S&P 500 dropped 0.8%, both indexes retreating from fresh record highs set Monday.

Bank stocks fared better after another round of solid results from the likes of Bank of America and Goldman Sachs. Those came after Wells Fargo and JPMorgan Chase reported strong earnings last week, adding to investors' hopes that the economy can avoid a recession even as inflation moderates.

Earlier Tuesday, Chinese shares ended lower, led by finance stocks, with the Shanghai Composite Index dropping 2.5%. The Shenzhen Composite Index fell 2.1% and the ChiNext Price Index declined 3.2%. Investors are awaiting details and the scope of China's fiscal stimulus package. Consumer stocks pushed Hong Kong's Hang Seng Index down 3.7%.

Japan's Nikkei Stock Average rose 0.8%, boosted by Wall Street's gains overnight and weakness in the yen.

Australia's S&P/ASX 200 gained 0.8%, carried to a record close by shares of its largest banks and miners. The benchmark index secured a second straight daily gain and moved into positive territory for the month to date.

New Zealand's NZX-50 closed 0.6% higher, recovering almost all its week-opening losses amid strength in aged-care and financial stocks.

COMMODITIES

Oil futures fell to the lowest level since Oct. 2 after reports that Israel assured the U.S. it would target Iranian military rather than oil or nuclear facilities in response to Iran's missile attack.

"As geopolitical risks seem to ease, the oil market has reversed its recent aggressive rally," the StoneX analysts, led by Alex Hodes, wrote.

Renewed worries about energy demand from China also contributed to oil's losses, after the International Energy Agency said China was to blame for its weaker oil-demand growth forecast.

West Texas Intermediate crude for November delivery dropped 4.4% to $70.58 a barrel on the New York Mercantile Exchange. December Brent crude declined 4.1% to $74.25 a barrel on ICE Futures Europe.

Investors moved into gold as equities fell, with traders opting to stash money in precious metals. Front Month Comex Gold for October delivery rose 0.5% to $2661.40, the third gain in four sessions.

"Gold prices are likely to remain elevated for the foreseeable future, underpinned by new stimulative measures in China," said Taylor Krystkowiak of Themes ETF.

TODAY'S TOP HEADLINES

Fed's Daly Looks Beyond a Soft Landing. U.S. Economy Is 'Clearly in a Better Place.'

Getting the U.S. economy to a place where there is sustained price stability and healthy labor conditions is only the beginning.

San Francisco Fed President Mary Daly is looking beyond the so-called "soft landing" that the Federal Reserve is aiming to achieve. Instead, she envisions the Fed helping create a sustained economic expansion.

"In the coming months and years, there will almost certainly be economic bumps, disturbances, and scares. And the Federal Reserve cannot fully prevent shocks from having an impact," Daly said in prepared remarks at New York University Stern School of Business on Tuesday. "But barring such events, and with the right monetary policy mix, we can help create the conditions for enduring growth."

Manufacturing activity contracts in New York region in October after surging in prior month

The numbers: The New York Fed's Empire State business-conditions index, a gauge of manufacturing activity in the state, fell 23.4 points in October to negative 11.9, the regional Federal Reserve bank said Tuesday. It is the weakest reading since May.

The drop follows a surge in September, when the index hit its highest level in 29 months.

Economists had expected a reading of 3, according to a survey by the Wall Street Journal.

United Airlines' Earnings Shrug Off the Gloom From Delta

United Airlines reported better-than-expected third-quarter adjusted earnings of $3.33 a share and revenue of $14.84 billion.

Shares were rising 1.5% in late trading Tuesday, after gaining 0.8% in regular trading.

Analysts expected the legacy carrier to post an adjusted profit of $3.17 a share, down 13% from a year ago, from sales of $14.8 billion, according to FactSet consensus estimates.

Three Big Takeaways From Bank Earnings

The country's biggest banks said American consumers appeared to be on steadier financial footing in the third quarter, with executives suggesting the economy has either reached or neared a soft landing.

JPMorgan Chase, Bank of America, Citigroup and Wells Fargo said consumers continued to spend and borrow at a healthy clip, helped by a resilient job market and wage growth that has outpaced inflation. The banks appeared more confident than in previous quarters that the trend would hold up against still-elevated interest rates and several years of price increases.

Still, there were signs that growth has cooled. Executives said people with lower incomes or credit scores were still under pressure from high prices for staples like food and high costs to borrow on credit cards, but that slower inflation and lower rates may help. The Federal Reserve cut interest rates just before the end of the third quarter.

ASML Expects Slower Semiconductor Recovery, Weighing on Chip Stocks

ASML Holding warned of a slower-than-expected recovery for some areas of the semiconductor industry after orders came in below analysts' expectations as chip makers held back spending on key production equipment.

The Dutch company, which supplies semiconductor-making machinery to chip makers, booked 2.63 billion euros, equivalent to $2.87 billion, in orders in the third quarter, up from 2.60 billion euros a year earlier but well below analysts' forecast of 5.59 billion euros, according to consensus estimates by Visible Alpha.

"While there continue to be strong developments and upside potential in AI, other market segments are taking longer to recover," Chief Executive Christophe Fouquet said in a news release. "It now appears the recovery is more gradual than previously expected. This is expected to continue in 2025, which is leading to customer cautiousness."

Louis Vuitton Owner LVMH Misses Revenue Expectations

Louis Vuitton owner LVMH, the world's largest luxury-goods company, reported lower third-quarter revenue that missed market estimates, the latest sign of a global slowdown in demand that is plaguing the sector.

The French luxury company-considered a bellwether for the industry-said it experienced challenges in most markets last quarter, with trends among Chinese consumers deteriorating further.

China, once a growth engine for the sector, has become the Achilles' heel of several luxury brands. The country is facing an economic malaise, marked by a sluggish real-estate sector and an uncertain economic outlook that has dented consumer sentiment. This has led Chinese consumers, especially those less affluent, to cut back on luxury purchases.

Expected Major Events for Wednesday

00:00/AUS: Aug Westpac-Melbourne Institute Indexes of Economic Activity

00:00/AUS: Sep Vacancy Report

03:00/SKA: Aug Money Supply index L

03:00/AUS: Oct Monthly Leading Indicator of Employment

06:30/INA: Oct Bank Indonesia Board of Governors meeting and decision

07:00/PHI: Philippine Monetary Policy meeting and decision

07:00/THA: Bank of Thailand Monetary Policy Committee meeting and decision

09:59/CHN: Sep FDI Foreign Direct Investment

14:30/AUS: Aug Australia Conference Board Leading Index

23:50/JPN: Sep Provisional Trade Statistics for the Month

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This article is a text version of a Wall Street Journal newsletter published earlier today.

(END) Dow Jones Newswires

October 15, 2024 16:45 ET (20:45 GMT)

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