Tesla, AT&T Help Drag Wall Street Lower

It still works through the system, higher rates for everyone. It’s more expensive to buy a car, more expensive to buy a house from a financing perspective.

Several banks also fell after reporting weaker-than-expected earnings and earnings, including KeyCorp and Zions Bancorp. The spotlight was particularly harsh on smaller and medium-sized banks amid concerns that their clients would withdraw deposits after the second and third biggest US bank failures in history last month.

Zions was down 4.9% and KeyCorp was down 2.7%. Truist Financial fell 3.8% after weaker-than-expected earnings.

AT&T fell 10.4% after reporting slightly weaker revenue than analysts had predicted, though earnings came in better than expected. Analysts also pointed to weaker cash flow than some had expected. It was the worst day for its stock in two decades and the second worst since late 1983.

In the bond market, yields fell after a number of reports about the US economy.

Last week, slightly more workers filed for unemployment benefits than the previous week, a potential signal that a still strong labor market is beginning to weaken under the weight of much higher interest rates. The number of persistent claims for unemployment benefits also rose to the highest level since November 2021, according to Rubeela Farooqi, chief US economist at High Frequency Economics.

A separate report said mid-Atlantic manufacturing trends weakened far more than economists had expected.

They helped drive the 10-year Treasury yield back to 3.53% from 3.59% at the end of Wednesday. The two-year interest rate, which is more in line with expectations for the Federal Reserve, fell from 4.25% to 4.14%.

The Fed has been deliberately trying to cool the economy for more than a year in hopes of curbing high inflation. It does this by raising short-term interest rates. It is an effective but blunt tool that slows down the broad economy, increases the risk of a recession and hurts investment prices.

The housing market was one of the first sectors to succumb to the weight of much higher interest rates as mortgage rates rose rapidly. A report on Thursday said sales of formerly occupied homes slowed in March but remain above the lows seen at the beginning of the year. The labor market will typically collapse later under the weight of higher interest rates.

Big corporate profits that beat analysts’ expectations helped limit Wall Street’s losses Thursday.

Lam Research was one of the strongest forces pushing the S&P 500 higher after the supplier to the semiconductor industry rose 7.2%. It reported earnings and earnings for the last quarter that beat Wall Street’s forecasts.

Steel Dynamics climbed 4.9%, homebuilder DR Horton gained 5.6%, casino operator Las Vegas Sands rose 3.7% and steelmaker Nucor rose 5.5%.

Like casinos, several companies that provide customer experiences have recently reported strong demand, Haworth said. This despite concerns about a slowing economy.

There is a real question of how much demand for destruction there will be, he said. If we do have a recession, there’s going to be demand destruction, and yet airline revenues — they don’t see demand destruction.

Overall, the majority of companies have so far beat earnings forecasts in the early days of this reporting season. That’s probably in large part because expectations were pretty low.

Analysts predicted this would mark the sharpest drop in S&P 500 earnings per share since the pandemic ravaged the economy in 2020. Earnings are under pressure as inflation remains high, interest rates are much higher than a year ago and parts of the economy are slowing.

In markets abroad, Asian stock indices were mixed after data showed Japan’s trade deficit narrowed in March as exports grew more than expected. But exports to China fell, due to the slow recovery from the pandemic disruptions.

European equities were mixed.

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AP Business Writer Elaine Kurtenbach contributed.