U.S. stock indexes were lower in midday trade on Wednesday, with the Dow industrials extending the previous day’s losses following a broad sell-off on Wall Street fueled by rising Treasury yields as investors weighed the outlook of the Federal Reserve’s monetary policy and the possibility of a government shutdown.
Meanwhile, U.S. oil prices were trading at their highest intraday levels in 2023, reviving inflation worries and adding to concerns of tight crude supply amid OPEC+ production cuts while the dollar reached new 10 month highs.
How are stock indexes trading
-
The S&P 500
SPX
lost 20 points, or 0.5% to 4,254 -
The Dow Jones Industrial Average
DJIA
dropped 191 points, or 0.6% to 33,427 -
The Nasdaq Composite
COMP
was off 50 points, or 0.4% to 13,015
On Tuesday, the Dow industrials fell 388 points, or 1.14%, to end at 33,619, suffering its largest one-day point and percentage decline since March 22, according to Dow Jones Market Data. The S&P 500 declined 1.5%, to 4,274, while the Nasdaq Composite dropped 1.6%.
What’s driving markets
U.S. stock indexes were turning lower midday Wednesday, despite positive economic data release from the Commerce Department, which showed orders for long-lasting or durable goods rose a strong-than-expected 0.2% in August and briefly boosted market sentiment in the early morning trade. Economists polled by the Wall Street Journal had forecast a 0.5% decline.
Durable-goods orders minus defense orders actually fell 0.7% last month, but the so-called core orders, which omits defense and transportation and is a proxy for broader business investment, rose 0.9%, the government said.
Earlier a dip in Treasury yields helped lift the stock indexes Wednesday morning with the yield on the 2-year Treasury
BX:TMUBMUSD02Y
fell 3 basis points to 5.104% from 5.129% on Tuesday. However, the yield on the 10-year Treasury
BX:TMUBMUSD10Y
resumed its climb, up 3 basis points, at 4.583%, according to FactSet data.
“Investors continue to grapple with the implications of an extended period of elevated interest rates and the potential economic repercussions, and they seem to favor the cut-run maneuver this week,” said Stephen Innes, managing partner at SPI Asset Management.
“Heightened investor anxiety due to the looming possibility of a partial U.S. government shutdown is not helping matters,” Innes added.
Melissa Brown, head of applied research at Axioma, said there’s nervousness in the financial markets that the Fed will still raise interest rates despite cooling inflation, so investors are afraid that policymakers will “mess it up by going too far.”
“We’ve already seen for the past couple of weeks the investor sentiment, particularly in the U.S., has become more negative,” Brown told MarketWatch via phone on Wednesday. “…our view is if sentiment is negative, bad news is going to be punished a lot. [If] good news is not [so] good, it’s certainly not going to be highly rewarded.”
MarketWatch Live Coverage: Government shutdown: Aid for food, housing on the line with 3 days left for deal
Jeffrey J. Roach, chief economist at LPL Financial said investors should expect a choppy market from the trifecta of a spike in energy prices, the restart of student loan payments, and a looming U.S. government shutdown due impasse over the budget deficit in Congress.
As a result, the Fed may end up being more patient and cautious as it assesses the economy as the unknown economic impact of a government shutdown will likely keep policymakers from altering their interest-rate policy, Roach said in emailed comments.
“The current dynamics support our baseline view that a recession could begin by end of year or early next year if consumers pull back spending,” he added.
The CBOE VIX index
VIX,
Wall Street’s so-called fear gauge, hit a four-month high above 19 on Wednesday. And the S&P 500’s (SPX) 14-day relative strength index, a closely watched momentum gauge, finished Tuesday’s session at 30.3, a fraction above the threshold of ‘oversold’ territory, and its lowest level of the year.
Companies in focus
-
Shares of Costco Wholesale Corp.
COST,
+1.54%
gained 1.3% on Wednesday after the warehouse club’s earnings topped Wall Street estimates, and the company’s chief financial officer said theft has not risen “dramatically” over the past year. -
Paychex Inc.
PAYX,
+4.15%
jumped 4% after the human resources services company reported fiscal first-quarter profit and revenue that rose above expectations, and nudged up its full-year outlook. -
Micron Technology’s
MU,
-1.07%
stock dropped 1.1% as the memory-chip maker is set to post its fiscal fourth-quarter results Wednesday after the market closes. The memory-chip maker is expected to report $3.95 billion in revenue, down from $6.64 billion a year earlier, according to FactSet.
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