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Wall Street closed sharply lower on Wednesday as the benchmark 10-year treasury resumed its climb toward the 5% mark. Disappointing numbers coming in from big-tech earnings weighed on the market. All of the three major stock indexes ended in the red.
How Did the Benchmarks Perform?
The Dow Jones Industrial Average (DJI) fell 0.3% or 105.45 points to close at 33,035.93. Twenty components of the 30-stock index ended in negative territory, while 10 ended in positive.
The tech-heavy Nasdaq Composite plunged 318.65 points or 2.4% to close at 12,821.22. This was the benchmark index’s biggest single-day percentage drop since February 2021.
The S&P 500 declined 60.91 points, or 1.4%, to close at 4,186.77, notching its fifth decline in six sessions. Nine out of the 11 broad sectors of the benchmark index closed in the red. The Communication Services Select Sector SPDR (XLC), the Real Estate Select Sector SPDR (XLRE) and the Consumer Discretionary Select Sector SPDR (XLY) slid 4.3%, 2.1% and 2%, respectively, while the Utilities Select Sector SPDR (XLU) advanced 0.6%.
The fear-gauge CBOE Volatility Index (VIX) increased 6.4% to 20.19. A total of 10.71 billion shares were traded on Wednesday, higher than the last 20-session average of 10.68 billion. Decliners outnumbered advancers on the NYSE by a 3.61-to-1 ratio. On the Nasdaq, declining issues led advancers by 2.63-to-1.
Yield on 10-Year Treasury Note Resumes its Climb
The yield on the benchmark U.S. 10-year treasury note has been recently on the rise, with investors betting that the Federal Reserve would keep interest rates at their current high levels for longer. Having temporarily breached the 5% mark last Monday, the yield resumed its climb on Wednesday, closing at 4.949%, up 10.6 basis points.
When the market is volatile, or the economy's prospects do not seem rosy, investors usually flock to the bond market for safety. On Wednesday, robust numbers from new home sales data and multiple-decades-high mortgage rates stoked fear that the Fed would be pushed to infer that it needs to keep rates higher for longer.
There is a rising feeling among investors that if this high interest rate regime continues, the central bank will not be successful in its bid to attain a soft landing for the economy. Currently, there is a general consensus that interest rates will be at 4.7% by the end of 2024 compared with expectations of a level of 4.2% at the start of September.
Alphabet’s Cloud Revenue Weighs on the Market
Google parent Alphabet Inc.’s (GOOGL - Free Report) third-quarter 2023 earnings of $1.55 per share beat the Zacks Consensus Estimate by 6.9%. Revenues of $76.7 billion increased 11% year over year. However, the company experienced slow growth in Google Cloud revenues, which was a major negative.
The company’s shares plunged 6.8% in pre-market trading due to lower-than-expected Google Cloud revenues and finished 9.5% lower in the session after the disappointing numbers were released. This weighed heavily on the market and the communication services sector in particular, where it is a major player.
Per a government report, for the week ending Oct 20, 2023, U.S. commercial crude oil inventories (excluding those in the Strategic Petroleum Reserve) increased by 1.4 million barrels from the previous week. In the prior week, inventory had gone down by 4.5 million barrels.
The U.S. Census Bureau and the U.S. Department of Housing and Urban Development jointly reported that new home sales for September increased to 759,000 units sold. The number for August was revised up to 676,000 from the previously reported 675,000.
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Stock Market News for Oct 26, 2023
Wall Street closed sharply lower on Wednesday as the benchmark 10-year treasury resumed its climb toward the 5% mark. Disappointing numbers coming in from big-tech earnings weighed on the market. All of the three major stock indexes ended in the red.
How Did the Benchmarks Perform?
The Dow Jones Industrial Average (DJI) fell 0.3% or 105.45 points to close at 33,035.93. Twenty components of the 30-stock index ended in negative territory, while 10 ended in positive.
The tech-heavy Nasdaq Composite plunged 318.65 points or 2.4% to close at 12,821.22. This was the benchmark index’s biggest single-day percentage drop since February 2021.
The S&P 500 declined 60.91 points, or 1.4%, to close at 4,186.77, notching its fifth decline in six sessions. Nine out of the 11 broad sectors of the benchmark index closed in the red. The Communication Services Select Sector SPDR (XLC), the Real Estate Select Sector SPDR (XLRE) and the Consumer Discretionary Select Sector SPDR (XLY) slid 4.3%, 2.1% and 2%, respectively, while the Utilities Select Sector SPDR (XLU) advanced 0.6%.
The fear-gauge CBOE Volatility Index (VIX) increased 6.4% to 20.19. A total of 10.71 billion shares were traded on Wednesday, higher than the last 20-session average of 10.68 billion. Decliners outnumbered advancers on the NYSE by a 3.61-to-1 ratio. On the Nasdaq, declining issues led advancers by 2.63-to-1.
Yield on 10-Year Treasury Note Resumes its Climb
The yield on the benchmark U.S. 10-year treasury note has been recently on the rise, with investors betting that the Federal Reserve would keep interest rates at their current high levels for longer. Having temporarily breached the 5% mark last Monday, the yield resumed its climb on Wednesday, closing at 4.949%, up 10.6 basis points.
When the market is volatile, or the economy's prospects do not seem rosy, investors usually flock to the bond market for safety. On Wednesday, robust numbers from new home sales data and multiple-decades-high mortgage rates stoked fear that the Fed would be pushed to infer that it needs to keep rates higher for longer.
There is a rising feeling among investors that if this high interest rate regime continues, the central bank will not be successful in its bid to attain a soft landing for the economy. Currently, there is a general consensus that interest rates will be at 4.7% by the end of 2024 compared with expectations of a level of 4.2% at the start of September.
Alphabet’s Cloud Revenue Weighs on the Market
Google parent Alphabet Inc.’s (GOOGL - Free Report) third-quarter 2023 earnings of $1.55 per share beat the Zacks Consensus Estimate by 6.9%. Revenues of $76.7 billion increased 11% year over year. However, the company experienced slow growth in Google Cloud revenues, which was a major negative.
The company’s shares plunged 6.8% in pre-market trading due to lower-than-expected Google Cloud revenues and finished 9.5% lower in the session after the disappointing numbers were released. This weighed heavily on the market and the communication services sector in particular, where it is a major player.
Consequently, shares of AT&T Inc. (T - Free Report) and Meta Platforms, Inc. (META - Free Report) fell 2.2% and 4.2%, 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
Per a government report, for the week ending Oct 20, 2023, U.S. commercial crude oil inventories (excluding those in the Strategic Petroleum Reserve) increased by 1.4 million barrels from the previous week. In the prior week, inventory had gone down by 4.5 million barrels.
The U.S. Census Bureau and the U.S. Department of Housing and Urban Development jointly reported that new home sales for September increased to 759,000 units sold. The number for August was revised up to 676,000 from the previously reported 675,000.