U.S. equities faced a substantial downturn on Wednesday, as both the S&P 500 and Nasdaq Composite indexes plummeted by over 1%. The market was affected by rising Treasury yields and investor apprehension while scrutinizing the latest quarterly corporate results and forecasts.
Heightened tensions in the Middle East added to risk aversion, leading to a surge in the demand for safe-haven assets. Gold prices reached their highest level in over two months, while the Cboe Volatility Index, widely recognized as Wall Street’s fear gauge, saw a significant spike.
The increase in yields was attributed to data indicating a rebound in U.S. single-family homebuilding for the month of September. This supported the notion that the Federal Reserve is likely to maintain higher interest rates for an extended period.
Rick Meckler, a partner at Cherry Lane Investments, a family investment office in New Vernon, New Jersey, commented, “We’re in a period of sector rotation, and people are trying to figure out in this new environment – in a full reset of rates across the curve – what are the stocks that are going to continue to do well and what are the stocks that are going to suffer. Obviously, companies that are highly leveraged have difficulties in this kind of a market.”
The allure of risk-free U.S. Treasuries with higher yields diminished the appeal of equities for investors.
Turning to earnings reports, Procter & Gamble (NYSE: PG) saw its shares rise by 2.6% after exceeding market expectations in quarterly sales. In contrast, United Airlines Holdings (NASDAQ: UAL) suffered a 9.7% decline in its share price due to a weaker fourth-quarter profit forecast stemming from higher costs. Consequently, the S&P 500 passenger airlines index witnessed a 5.6% drop.
The Dow Jones Industrial Average incurred a loss of 332.57 points, or 0.98%, settling at 33,665.08. The S&P 500 also ended the day in the red, losing 58.6 points, or 1.34%, closing at 4,314.6, while the Nasdaq Composite dipped by 219.45 points, or 1.62%, ending at 13,314.30.
Investor concerns remained centered around the repercussions of the Israel-Hamas conflict, which commenced on October 7 with a Hamas attack on Israeli civilians and soldiers. During a brief visit on Wednesday, U.S. President Joe Biden affirmed solidarity with Israel and suggested that a fatal blast at a Gaza hospital might have resulted from a rocket misfire by militants.
In the realm of corporate earnings, Morgan Stanley’s third-quarter profit suffered due to sluggish dealmaking, leading to a 6.8% drop in its share price.
After the closing bell, Tesla (NASDAQ: TSLA) observed a 2% increase in its share value, while Netflix (NASDAQ: NFLX) surged by approximately 12% following their quarterly financial reports. Tesla had earlier seen a 4.8% decline, and Netflix ended the session with a 2.7% drop.
The days ahead are expected to bring forth more corporate earnings reports as the third-quarter U.S. earnings season intensifies.
The trading volume on U.S. exchanges reached 10.48 billion shares, slightly above the 10.45 billion average for the full session over the last 20 trading days.
Declining issues notably outnumbered advancing ones on the NYSE with a ratio of 4.67-to-1, while Nasdaq recorded a 3.33-to-1 ratio favoring decliners.
During this trading session, the S&P 500 registered 12 new 52-week highs and 25 new lows, while the Nasdaq Composite noted 25 new highs and 252 new lows.
