Wall Street falls as anxiety rises, earnings heat up

By Stephen Culp

NEW YORK (Reuters) -U.S. stocks turned lower on Thursday, reversing early gains as investors continued to rotate away from high-priced megacap growth stocks and second-quarter earnings season gathered steam.

All three major U.S. stock indexes were weaker in choppy trading, with the blue-chip Dow on course to snap its series of consecutive record closing highs.

The sell-off resumed a day after the Nasdaq posted its biggest one-day drop since December 2022 and the chip sector suffered its largest daily percentage plunge since the pandemic-related shutdown panic of March 2020.

But anxiety remained elevated. The CBOE Market Volatility index, often called the "fear index," touched its highest level since early May.

"Today is weak across the board," said Peter Tuz, president of Chase Investment Counsel in Charlottesville, Virginia. "With markets at near record highs, and reading these softer economic statistics, I think many investors are just taking a little bit of money off the table to see what earnings and the guidance are like over the next couple of weeks."

The Russell 2000 fell for the second day in a row after an apparent rotation into smallcaps sent the index soaring 11.5% in just five sessions, its most robust five-day gain since April 2020.

U.S.-listed shares of Taiwan Semiconductor Manufacturing fell 0.8%, weighing on chips following a report saying the United States is considering tighter curbs on tech exports to China.

In economic news, initial jobless claims data landed above analysts' estimates, providing further evidence that the labor market is softening. This is a necessary step toward putting inflation on a sustainable downward path, according to the U.S. Federal Reserve.

As of 2:21 p.m. ET, the Dow Jones Industrial Average fell 432.86 points, or 1.05%, to 40,765.22, the S&P 500 lost 41.02 points, or 0.73%, to 5,547.25 and the Nasdaq Composite dropped 141.28 points, or 0.79%, to 17,855.64.

Of the 11 major sectors in the S&P 500, healthcare stocks suffered the largest percentage decline, while energy and utilities were the only gainers.

Second-quarter earnings season gained momentum, with 60 of the companies in the S&P 500 having reported. Of those, 85% have delivered consensus-beating results, LSEG data showed.

Analysts now see aggregate year-on-year S&P 500 earnings growth of 11.1%.

Domino's Pizza tumbled 13.5% after falling short of estimates for quarterly same-store sales.

Homebuilder D.R. Horton beat profit estimates and delivered more new homes than expected, but tightened its annual forecast. Its shares jumped 10.5%.

The move also lifted the Philadelphia SE Housing index to a record high.

Warner Bros Discovery jumped 4.6% following a report that the company had discussed a plan to split its digital streaming and studio businesses from its legacy TV networks.

Netflix is expected to post its quarterly results after markets close.

Declining issues outnumbered advancers on the NYSE by a 2.47-to-1 ratio; on Nasdaq, a 2.88-to-1 ratio favored decliners.

The S&P 500 posted 76 new 52-week highs and two new lows; the Nasdaq Composite recorded 157 new highs and 42 new lows.

(Reporting by Stephen Culp; Additional Reporting by Lisa Mattackal and Ankika Biswas in Bengaluru; Editing by Richard Chang)