4:05pm: Wall Street closes with a whimper
It was another sad day on Wall Street as all major US indices finished well in the red.
The S&P 500 lost nearly 1%, or 44 points, to close at 4,533 points, with the Dow echoing the decrease at 35,029 points for another 1% loss. The Nasdaq fared even worse than its counterparts, losing 1.2% on the day to close at 14,340 points.
12:05pm: US indices mixed
US stocks were mixed midday on Wednesday while still trading in red, as investors continued to weigh soaring bond yields, and earnings reports throughout major indexes.
At noon, the Dow Jones Industrial Average gained 76 points, or 0.2%, at 34,445; while S&P and Nasdaq Composite were both up by 0.2%.
“At present, the losses equities have sustained seem to form part of a normal pullback, and have even yet to reach full ‘correction’ territory,” said Chris Beauchamp, chief market analyst at online trading platform IG. “Crucially, the more the Fed talks about higher rates, the more investors will acclimatize themselves to the prospect.”
The analyst noted that while there wasn’t much appetite to chase stocks at the highs of late December, “we should not lose sight of the fact that an improving economy will still provide the chance for earnings to grow, and the current reporting season should help remind investors of that fact.”
11am: Proactive North America headlines:
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9.43am: US stocks start higher
US stocks started ahead in New York as markets recovered from yesterday's declines but uncertainty still reigns.
The Dow Jones Industrial Average added around 62 points at 35,430 in New York.
The broader-based S&P 500 gained around 17 points to stand at 4,595, while the tech-laden Nasdaq Composite index added over 84 points at 14,591.
Craig Erlam, senior market analyst at Oanda, said that uncertainty continued to dominate after a "disappointing start" to earnings season.
"Inflation and interest rate concerns are going nowhere soon and with traders now increasingly considering the possibility of hikes larger than 25 basis points, the possibility of more pain in stock markets is very real," he said.
"The idea that we could go from rock bottom rates and enormous bond-buying to rapid tapering, 50 basis point hikes, and earlier balance sheet reduction is quite alarming. We're talking about markets that have become very accustomed to extensive support from central banks and very gentle unwinding when appropriate. This is quite a shock to the system," he added.
6.30am: US stocks seen opening up
US stocks are expected to open higher, recovering from a sharp fall after rising government bond yields and the prospect of higher interest rates saw investors cutting back on their equity exposure.
Futures for the Dow Jones Industrial Average rose 0.16% in Wednesday pre-market trading, while the broader S&P 500 index added 0.2% and those for the tech-heavy Nasdaq 100 gained 0.3%.
On Tuesday, the closely watched 2-year yield broke above 1% for the first time since February 2020, the month before the pandemic declaration that sent the US economy into recession. The 2-year Treasury is seen as a gauge of where the Federal Reserve will set short-term borrowing rates.
Rates rose along the yield curve, with the benchmark 10-year note hitting 1.86%, its highest since January 2020. The 10-year yield started 2022 around 1.5%.
The Dow dropped by 1.51%, to 35,338, while the S&P 500 declined 1.84% to 4,577 and the Nasdaq shed 2.60% to 14,507.
“Global stocks are taking a beating this week amid a surge in US Treasury yields as markets brace for the tightening of Fed policy,” commented Han Tan, chief market analyst at Exinity Group.
“Markets are anxious over the Fed potentially taking a more aggressive approach to controlling inflation. Fed Funds futures have fully priced in a move in March, with a total of four rate hikes of 25-basis points each expected across the whole of this year.
“Some segments of the market are also fearing that the Fed might be forced to take a sledgehammer to suppress surging US inflation by triggering a larger 50-basis point hike in March.”
Tan noted that tech and other growth stocks have borne the brunt of the hawkish Fed, leaving the Nasdaq on the cusp of a technical correction.
"The tech-heavy index has also fallen below its 200-day moving average for the first time since the onset of the pandemic in March 2020," he added. "We note the Nasdaq’s 14-day relative strength index has dropped precariously and is close to the 30 threshold which denotes oversold conditions."