US stocks slipped in light trading yesterday, pulling back from recent five-year highs ahead of an earnings season expected to be weak.
Trading volume was the lowest so far this year in a full session as the US government and the bond market were closed for the Columbus Day holiday. About 4.1bn shares changed hands on the New York Stock Exchange, the Nasdaq and NYSE MKT, compared with the year-to-date daily average of 6.54bn to last Friday.
Stocks were pressured throughout the day as the World Bank cut its growth forecasts for the East Asia and Pacific region, and warned that the slowdown in China could worsen and last longer than many analysts expect.
Analysts expect third-quarter earnings to fall for the first time in three years even though the S&P 500 gained 5.8 per cent during that period. Such a forecast might call into question whether the rally can be sustained.
“Certainly there have been a lot of downward revisions in earnings in general,” said Peter Jankovskis, of OakBrook Investments LLC in Lisle, Illinois. “Some people are predicting that we may see an overall decline in earnings, so there may be some defensive posturing and profit-taking.”
The reporting season begins in earnest today with Alcoa, which is expected to post a break-even quarter compared with a profit of 15 cents per share a year ago.
The Dow Jones industrial average fell 26.50 points, or 0.19 per cent, to 13,583.65 at the close. The S&P 500 lost 5.05 points, or 0.35 perc ent, to 1,455.88. The Nasdaq Composite dropped 23.83 points, or 0.76 per cent, to end at 3,112.35.