4:15pm: Rising rates and global uncertainty dent market optimism
Wall Street posted declines on Wednesday, grappling with concerns over rising interest rates amidst a wave of corporate earnings reports.
Despite a positive start, all three major indexes closed in the red, with the S&P 500 down approximately 0.6% to 5,022, the Dow Jones Industrial Average dropping 0.1% at 37,753, and the Nasdaq Composite leading the losses with a decline of 1.2% to close at 15,683.
Tech giants like Nvidia and Meta contributed to the market downturn, with the tech sector being the worst-performing.
Factors such as geopolitical tensions in the Middle East and uncertainty surrounding the timing and extent of rate adjustments have hindered the market's ability to sustain its early-year rally.
2:00pm: Tech giants lead decline
The wobble for US stocks has widened as today’s session has gone on, with the tech sector leading the retreat.
After opening on the front foot, much of the market is now in the red and the tech-heavy Nasdaq is at the vanguard of the move, down 95 points or 0.6% at just over 15,770.
The Dow Jones is very marginally above the flat-line, while the broader S&P 500 is down 0.3%.
Glowing deepest red on the Nasdaq heatmap is chip favourite Nvidia, while other megacaps are also lower, including Apple and Microsoft.
Tesla, despite the prospect of a car crash earnings call next week, is in the green.
“Markets are volatile right now; however, a relative calm has descended on the market and US,” says Kathleen Brooks, research director at XTB.
“US stocks are down a touch, but the Vix is lower, US Treasury yields are lower, and the dollar is mostly lower versus its G10 FX counterparts.”
She sees the drivers of the “calm” market being twofold: “firstly, although Fed chair Jerome Powell dialed back expectations for rate cuts during a speech on Tuesday, he also indicated that the Fed was not considering rate hikes either. Instead, it looks like after a number of months where inflation and labour market data has come in hotter than expected, the Fed will keep rates at their current level for as long as needed.”
The focus is now shifting to market fundamentals, Brooks says.
“Earnings season needs to deliver for the market rally to get back on track.
“Another factor to consider is market breadth. Investors don’t want to see the next leg of any stock market rally dominated by just a handful of names; they want more companies to share in the good times.”
However, the recent sell off could make that tricky, she says.
“For example, there are zero firms on the S&P 500 making a new 4-week high on Wednesday, with 14 making a fresh 4- week low. The percentage of firms above their 200-day moving average on the S&P 500 has also fallen, and is now just 67%, the percentage of firms above their 50-day moving average is just 32%.
“These are key medium- and short-term indicators that suggest stocks are losing important ground during this broad sell-off, and further downside could be likely.
“A similar theme is visible in Europe, 25% of FTSE 100 members have made a 4-week low in recent days, while 12% of the Eurostoxx 50 have made a 4-week low.”
10.45am: Early share gains pared
The early gain for the Nasdaq has not been maintained, with the tech-heavy index now in the red.
Meanwhile, the Dow Jones and S&P 500 are only marginally above flat, up 0.1%.
After just over an hour, the Nasdaq is just below flat at 15,864.
The US dollar is down after hitting a five-month high.
"The rally has come to a halt based on improved mood across markets in overnight sessions in which European earnings surprised," said analysts at Monex.
"While yesterday was characterized by big drops across equities, sentiment is on the recovery while the world awaits for a solution to the Mideast crisis."
9.55am: Markets jump at open
The Nasdaq added 76 points to climb to 15,942 as the markets opened in positive territory on Wednesday.
The Dow Jones jumped 137 points to 37,936.40, and the S&P 500 by 20 to 5,072, in the meantime.
Though analysts had warned trading may be muted following Tuesday’s hawkish comments on interest rates coming from the Fed, US markets looked to follow European markets higher after a string of solid company updates.
“Company earnings, as good as they are, may only provide a temporary lift as the macro outlook has dimmed for stocks in recent weeks,” City Index analyst Fawad Razaqzada warned, however.
That said, United Airlines was leading the charge in the US, with gains of 11.8% after reporting a slimmer-than-expected US$164 million loss in the first quarter.
Groundings of its 737 MAX 9 jets in January cost US$200 million, United also said, following issues at Boeing Co (NYSE:BA, ETR:BCO), which has seen the manufacturer compensate Alaska Air.
American Airlines Group Inc (NASDAQ:AAL, ETR:A1G) was among rival carriers to be buoyed by the news, climbing 4.7%.
Elsewhere, UnitedHealth Group Inc (NYSE:UNH, ETR:UNH) rose 3%, adding to gains recorded on Tuesday after it said costs of a cyberattack would not be as bad as expected in a first-quarter report.
7.13am: Positive start expected on Wall Street
A 181-point gain by the Dow Jones should set a positive tone for the S&P 500 and Nasdaq when markets open, as all rose in futures trading on Tuesday morning.
Alongside the Dow Jones’ rise to 38,227, pre-market trading had the S&P 500 up 22 points at 5,115 and the Nasdaq at 17,936, 55 points higher.
The gains come after a mixed day of trading on Tuesday, as IMF data showed the US economy growing fastest out of the G7 this year but Fed chair Jerome Powell reiterated a hawkish approach to tackling inflation.
“While many see this as grounds for optimism for US equities, it does little to help those waiting patiently for a rate cut from the Federal Open Markets Committee,” Scope Markets analyst Joshua Mahony commented.
Among companies, CXAPP Inc soared in pre-market trading after reporting record annual recurring revenue growth during 2023.
Vanda Pharmaceuticals Inc also jumped after news broke of a new takeover offer by Future Pak for up to US$7.75 a share - a 91.4% premium on Monday’s closing price.