U.S. stocks experienced a downturn on Wednesday, influenced by rising Treasury yields that pressured the tech sector. The stronger-than-expected economic data also complicated investor expectations for a Federal Reserve rate cut in March.
As of 13:47 ET (18:47 GMT), the Dow Jones Industrial Average had dropped by 206 points, or 0.6%, the S&P 500 was down 1%, and the NASDAQ Composite had fallen by 1.3%.
The climb in U.S. Treasury yields persisted, with the yield on the 10-year Treasury note surpassing 4%, marking the highest level this year. This surge was triggered by a 0.6% increase in U.S. retail sales for December, exceeding the anticipated 0.4%. The robust consumer performance, constituting two-thirds of economic growth, suggested a healthy economy and diminished expectations for an imminent rate cut in March.
According to Investing.com‘s Fed Rate Monitor Tool, the probability of a March rate cut dropped to about 50%, down from 61% a year earlier.
Federal Reserve Governor Christopher Waller’s remarks on Tuesday, emphasizing the likelihood of rate cuts in the future but ruling out near-term considerations due to the ongoing resilience in the U.S. economy, were reinforced by the economic data.
In the financial sector, Charles Schwab faced a 1% decline as it reported a 22% dip in net profit for 2023, attributing the decrease to challenges posed by a tighter interest rate environment. On the other hand, Interactive Brokers saw a 2% rise in its stock after fourth-quarter revenue surpassed analyst estimates, despite earnings falling short due to a decline in net interest income in Q4.
Tesla witnessed a 3% decline following price cuts on its Model Y in Europe, raising concerns about potential margin pressures. Boeing, however, experienced a 1% increase after the Federal Aviation Administration completed preliminary inspections on 40 Boeing 737 Max 9 airplanes, raising hopes for their eventual return to service.
Walt Disney’s stock rose by 0.3% after the company rejected activist investor-nominated board members, citing the considerable progress made by its current leadership team in executing a comprehensive company overhaul.
Energy stocks faced a 1% decline as oil prices continued to drop, driven by disappointing growth data from China, the world’s second-largest crude consumer, prompting concerns about future demand.