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Wall Street closed lower on Wednesday, dragged down by tech and discretionary stocks. Recession fears dominated trade upon the release of Federal Reserve minutes, even as inflation numbers indicated that the central bank’s policies were taking effect. All three major indexes ended in the red.
How Did the Benchmarks Perform?
The Dow Jones Industrial Average (DJI) fell 0.1% or 38.29 points to close at 33,646.5. Sixteen components of the 30-stock index ended in negative territory, while 14 ended in positive.
The S&P 500 lost 0.4% or 16.99 points to close at 4,091.95. Seven of the 11 broad sectors of the benchmark index ended in negative territory. The Consumer Discretionary Select Sector SPDR (XLY), the Communication Services Select Sector SPDR (XLC) and the Technology Select Sector SPDR (XLBK) declined 1.6%, 1% and 0.6%, respectively, while the Industrials Select Sector SPDR (XLI) advanced 0.3%.
The tech-heavy Nasdaq slid 102.54 points, or 0.9%, to finish at 11,929.34.
The fear-gauge CBOE Volatility Index (VIX) remained flat at 19.09. A total of 10.4 billion shares were traded on Wednesday, lower than the last 20-session average of 11.8 billion. Decliners outnumbered advancers on the NYSE by a 1.08-to-1 ratio. On the Nasdaq, a 1.69-to-1 ratio favored declining issues.
Headline CPI Comes in Lower
The session had started on a good note, with headline inflation barely increasing in March. The U.S. Bureau of Labor Statistics reported that the Consumer Price Index (CPI) had advanced 0.1% last month after rising 0.4% in February. This compares to the consensus estimate of 2% for the current period, and was cheered by investors. The Fed would most likely interpret the numbers as evidence that its stringent policy moves have started taking effect. President Joe Biden shared this buoyant mood and said that the sharp slowdown in the inflation rate meant "more breathing room for hard-working Americans."
However, core CPI, which excludes food and energy prices, remained significantly hot albeit on par with expectations, rising 0.4% in March. In February, it had increased 0.5% and is still way above the Fed’s target rate of 0.2%.
Fed Minutes Cast a Pall on the Market
The relief from the CPI report did not last long, with the Fed minutes getting published as the day progressed. The March meeting of the Federal Open Market Committee included a presentation from staff members on the potential repercussions of the baking sector crisis that began in early March, and it does not paint a rosy picture.
The minutes did show, however, that Fed members had seriously pondered on a rate pause but had finally voted to increase the interest rate by 25 bps, the ninth increase over the past year. The rate, thus, currently stands at a target range of 4.75-5%, its highest level since late 2007. As a fallout of the banking crisis, Fed officials expect gross domestic product growth of a frugal 0.4% for 2023. Even as the minutes noted that the bail-out programs initiated by the treasury helped the struggling financial sector, officials expected lending to tighten and credit conditions to deteriorate. In other words, rate hikes are probably not going away anytime soon if the crisis deepens further.
The way the market has been reacting to chatter about continued rate hikes, it did not come as a surprise that recession became a major talking point on Wednesday. It may be argued that only after the Fed definitively signals a rate pause, this trend might change. On cue, growth and tech stocks, consumer discretionaries declined the most. Tech has been on a free-fall all week.
According to a government report, for the week ending Apr 7, 2023, U.S. commercial crude oil inventories (excluding those in the Strategic Petroleum Reserve) increased by 0.6 million barrels from the previous week.
Emerson Electric Co. (EMR - Free Report) has entered into a definitive agreement to acquire National Instruments Corp or NI for $60 per share in cash, representing an enterprise value of $8.2 billion. (Read More)
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Stock Market News for Apr 13, 2023
Wall Street closed lower on Wednesday, dragged down by tech and discretionary stocks. Recession fears dominated trade upon the release of Federal Reserve minutes, even as inflation numbers indicated that the central bank’s policies were taking effect. All three major indexes ended in the red.
How Did the Benchmarks Perform?
The Dow Jones Industrial Average (DJI) fell 0.1% or 38.29 points to close at 33,646.5. Sixteen components of the 30-stock index ended in negative territory, while 14 ended in positive.
The S&P 500 lost 0.4% or 16.99 points to close at 4,091.95. Seven of the 11 broad sectors of the benchmark index ended in negative territory. The Consumer Discretionary Select Sector SPDR (XLY), the Communication Services Select Sector SPDR (XLC) and the Technology Select Sector SPDR (XLBK) declined 1.6%, 1% and 0.6%, respectively, while the Industrials Select Sector SPDR (XLI) advanced 0.3%.
The tech-heavy Nasdaq slid 102.54 points, or 0.9%, to finish at 11,929.34.
The fear-gauge CBOE Volatility Index (VIX) remained flat at 19.09. A total of 10.4 billion shares were traded on Wednesday, lower than the last 20-session average of 11.8 billion. Decliners outnumbered advancers on the NYSE by a 1.08-to-1 ratio. On the Nasdaq, a 1.69-to-1 ratio favored declining issues.
Headline CPI Comes in Lower
The session had started on a good note, with headline inflation barely increasing in March. The U.S. Bureau of Labor Statistics reported that the Consumer Price Index (CPI) had advanced 0.1% last month after rising 0.4% in February. This compares to the consensus estimate of 2% for the current period, and was cheered by investors. The Fed would most likely interpret the numbers as evidence that its stringent policy moves have started taking effect. President Joe Biden shared this buoyant mood and said that the sharp slowdown in the inflation rate meant "more breathing room for hard-working Americans."
However, core CPI, which excludes food and energy prices, remained significantly hot albeit on par with expectations, rising 0.4% in March. In February, it had increased 0.5% and is still way above the Fed’s target rate of 0.2%.
Fed Minutes Cast a Pall on the Market
The relief from the CPI report did not last long, with the Fed minutes getting published as the day progressed. The March meeting of the Federal Open Market Committee included a presentation from staff members on the potential repercussions of the baking sector crisis that began in early March, and it does not paint a rosy picture.
The minutes did show, however, that Fed members had seriously pondered on a rate pause but had finally voted to increase the interest rate by 25 bps, the ninth increase over the past year. The rate, thus, currently stands at a target range of 4.75-5%, its highest level since late 2007. As a fallout of the banking crisis, Fed officials expect gross domestic product growth of a frugal 0.4% for 2023. Even as the minutes noted that the bail-out programs initiated by the treasury helped the struggling financial sector, officials expected lending to tighten and credit conditions to deteriorate. In other words, rate hikes are probably not going away anytime soon if the crisis deepens further.
The way the market has been reacting to chatter about continued rate hikes, it did not come as a surprise that recession became a major talking point on Wednesday. It may be argued that only after the Fed definitively signals a rate pause, this trend might change. On cue, growth and tech stocks, consumer discretionaries declined the most. Tech has been on a free-fall all week.
Consequently, shares of Netflix, Inc. (NFLX - Free Report) and NVIDIA Corporation (NVDA - Free Report) lost 2.1% and 2.5%, respectively. Both carry a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Economic Data
According to a government report, for the week ending Apr 7, 2023, U.S. commercial crude oil inventories (excluding those in the Strategic Petroleum Reserve) increased by 0.6 million barrels from the previous week.
Stocks That Have Made Headline
Emerson Set to Acquire National Instruments for $8.2B
Emerson Electric Co. (EMR - Free Report) has entered into a definitive agreement to acquire National Instruments Corp or NI for $60 per share in cash, representing an enterprise value of $8.2 billion. (Read More)