TLDR:
- Dow, S&P 500, and Nasdaq all declined for third consecutive day, with Dow falling 409.94 points (0.96%)
- 10-year Treasury yield hit highest level since July at 4.25%
- Major tech stocks under pressure with Apple, Nvidia, Meta, Netflix and Amazon all declining
- McDonald’s shares dropped 5% following E. coli outbreak news
- Market sentiment affected by doubts about Fed’s aggressive rate cuts and upcoming elections
U.S. stock markets extended their losing streak for a third consecutive session on Wednesday as rising Treasury yields and concerns about future interest rate cuts weighed heavily on investor sentiment.
The Dow Jones Industrial Average recorded its worst day since early September, plunging 409.94 points, or 0.96%, to close at 42,514.95. The S&P 500 fell 0.92% to 5,797.42, while the tech-heavy Nasdaq Composite experienced the steepest decline, dropping 1.6% to end at 18,276.65.
The benchmark 10-year Treasury yield climbed above 4.25% during the session, reaching its highest level since July 26. This surge in yields has persisted despite the Federal Reserve’s interest rate cut in September, reflecting growing uncertainty about the central bank’s future monetary policy decisions.
Brent Schutte, Chief Investment Officer at Northwestern Mutual Wealth Management, attributed the market decline to the impact of higher rates. “The market is repricing the probability that the Fed can aggressively cut rates,” he explained, noting that various sectors of the economy are still adjusting to the higher interest rate environment.
Technology stocks faced significant pressure during the session. Industry giants including Apple and Nvidia saw their shares decline by more than 2%, while Meta Platforms dropped 3%. Netflix and Amazon also retreated, each falling approximately 2%.
McDonald’s, a Dow component, experienced a notable decline of over 5% following news from the U.S. Centers for Disease Control and Prevention about an E. coli outbreak linked to the company’s Quarter Pounder burgers, resulting in 10 hospitalizations and one death.
Core stocks weren’t spared from the selloff. Coca-Cola shares fell about 2% despite the company reporting better-than-expected third-quarter earnings. Tesla’s stock declined 1% ahead of its earnings release scheduled for after the market close.
The market’s negative sentiment has been further amplified by concerns about growing fiscal deficits and the potential economic impact of the upcoming U.S. presidential election. Some market observers have pointed to recent economic data as contributing to the yield increases.
Wells Fargo’s Investment Institute expressed caution about near-term market prospects. In a note to clients, Darrell Cronk, the institute’s president, suggested that equity markets might struggle to advance meaningfully past recent highs as various uncertainties persist.
The selloff extended beyond equities, affecting multiple market sectors. The recent market environment has particularly impacted rate-sensitive stocks, with real estate seeing notable pressure as rising yields typically catalyze stock drawdowns.
Large-cap stocks, particularly in the technology sector, appear most vulnerable in the current market environment. Analysts suggest this segment of the market may be overvalued and due for a correction as recession risks linger.
Major corporations continue to report earnings, with mixed results adding to market volatility. General Motors notably raised its guidance for the third time this year, while GE Aerospace and Verizon reported mixed third-quarter results.
The broader market declined despite some positive corporate earnings reports, indicating that macro concerns about interest rates and economic stability are currently outweighing company-specific developments.
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