U.S. stock indices traded lower on Wednesday afternoon, with Dow industrials briefly hitting two-week lows as the broader market was weighed down by sales in energy sectors, materials and information technology.
Investors have also digested comments from Federal Reserve Chairman James Bullard, who said the Fed should ease monetary programs as the most severe impact of the COVID pandemic wears off.
- The Dow Jones Industrial Average traded 98 points, or 0.3%, down to around 35,000, but had touched an intraday nadir of 34,925.61, which represents the lowest level in the premier gauge. order since about August 20, according to FactSet data.
- The S&P 500 Index lost around 11 points, or 0.2%, to 4,509.
- The Nasdaq Composite Index traded 98 points, or 0.6%, down to 15,275.
At Tuesday, the Dow Jones lost 269.09 points, or 0.8%, to end at 35,100, the S&P 500 slipped 15.40 points, or 0.3%, to end at 4,520.03. The Nasdaq Composite gained 10.81 points, or 0.1%, to end at 15,374.33.
What drives the market?
Stocks were under pressure in relatively light trading, after Labor Day, where markets were closed on Monday, and in the middle of the end of Rosh Hashanah, which ends at sunset on Wednesday.
Traders were selling stocks in the information technology, energy and materials sectors as uncertainty grows over the outlook for stocks after a period of strong earnings in the second quarter. Doubts have also arisen over the persistence of supportive monetary policies, credited with fueling record gains for equities, now considered highly valued.
âOverall, investors have had a pretty decent run this year, but now the focus is shifting from the post-lockdown spending madness to how corporate earnings might perform next year,â he said. Russ Mold, director of investments at AJ Bell, said in a note to clients.
A handful of Wall Street banks, including Goldman Sachs, have reduce US growth targets following weaker-than-expected employment figures.
âThere is a feeling that some of the market forecast has been overly bullish and so there might be some disappointment in the stock price unless we see the GDP numbers rise and the COVID delta variant stops causing so much. of problems, âMold said.
On top of that, St. Louis Fed Chairman Bullard said the central bank would continue with its monetary easing plans and dismissed concerns about slowing jobs, in an interview with the Financial Times. published Wednesday.
âThere is a lot of demand for workers and there are more vacancies than there are unemployed,â Bullard said. told the FT. Matching the two will contribute to a “very strong” labor market by 2022, he said.
âThe big picture is that the cone will start this year and end in the first half of next year,â Bullard said.
Bullard previously said the Fed should start the reduction process as soon as possible, with a view to ending purchases by early next year.
In economic data, Jobs hit a record 10.9 million in July, the Ministry of Labor said on Wednesday, marking the fifth consecutive monthly record and beating expectations of a 10 million increase. However, hires fell from 160,000 to 6.7 million in July. Separations increased from 174,000 to 5.8 million.
While some strategists remain bullish on the outlook for the markets, investors have also been urged to exercise more judgment.
âThe best days for cyclical value may be behind us, but it’s too early to turn fully to defensive themes. We’re sticking to reflation trading, but focusing on identifying companies that may experience upward earnings revisions, âwrote Lauren Goodwin, economist and portfolio strategist at New York Life Investments in a published memo. Wednesday.
âWe favor a global allocation, with an overweighting of developed international equities. Value and small cap stocks, with an emphasis on quality companies, should continue to thrive, âthe strategist wrote.
Another looming problem for investors is the government debt limit.
Secretary of the Treasury Janet Yellen said in a letter to congressional leaders On Wednesday, the Treasury could run out of room next month to continue paying government bills unless Congress steps in suspend or increase the federal borrowing limit.
“A delay that calls into question the ability of the federal government to meet all of its obligations would likely cause irreparable damage to the US economy and global financial markets,” Yellen wrote.
Read: Debt limits, social spending and infrastructure battles loom in “particularly frenetic time” for Congress
Going forward, investors will be on the lookout for clues about the health of the US economy from the Federal Reserve’s Beige Book, an anecdotal account of trading conditions in the 12 central bank business districts. . This report comes out at 2 p.m. EST.
Read: Stocks could fall 15% by the end of the year, Morgan Stanley warns. Here are some portfolio moves investors might consider.
Which companies are targeted?
- Spectrum Brands Holdings Inc. climbed 18% to a three-year high on Wednesday, after the branded consumer brands company announced an agreement to sell its hardware and home improvement business for $ 4.3 billion in cash to Swedish company ASSA ABLOY.
- Coinbase Global Inc. COIN shares fell 2.3%, under pressure after the crypto exchange said on Wednesday that an American regulator intends to prosecute it in court if it launches a planned program that allows users to earn interest on the crypto loan.
- Memes Stock GameStop Corp. is should publish quarterly results later Wednesday. Shares fell 1.6%.
- NIO inc. shares fell 6% after China’s electric car company plans announced sell up to $ 2 billion in fresh US stocks.
How are other assets traded?
- The yield on the 10-year US Treasury bill slipped almost 2 basis points to 1.34%. Yields move in the opposite direction of prices.
- The ICE US Dollar Index, a measure of the currency against a basket of six major rivals, rose 0.2%.
- Oil futures rose, with the US benchmark rising 0.9% to $ 68.99 a barrel on the New York Mercantile Exchange. Gold futures fell 0.2% to trade at $ 1,794 an ounce.
- European stocks closed lower, with the Stoxx Europe 600 down 1.1% and the FTSE 100 closing Wednesday’s session down 0.8%. The European Central Bank will meet on Thursday and economists expect a modest reduction in the bond purchase rate.
- In Asia, the Shanghai Composite rose 1.5%, while the Hang Seng index slipped 0.1% and Japan’s Nikkei 225 rose 0.9%.
Barbara Kollmeyer contributed reporting