Overview
On Wednesday, U.S. stocks closed lower, pressured by rising Treasury yields and investor uncertainty about the Federal Reserve’s interest rate cuts. Tech megacaps, including Nvidia, Apple, Meta, and Amazon, led the decline, dragging down the Nasdaq Composite. Meanwhile, disappointing corporate news from McDonald’s and Coca-Cola added to the negative sentiment.
Benchmark 10-year Treasury yields hit a three-month high as investors reevaluated the Fed’s rate-cut outlook, factoring in strong economic data and the upcoming U.S. presidential election. While most sectors finished in the red, utilities and real estate managed to post gains, as investors sought safe havens.
- Dow Jones Industrial Average: Fell 0.96% to 42,514.95
- S&P 500: Lost 0.92% to 5,797.42
- Nasdaq Composite: Declined 1.60% to 18,276.65
Fear & Greed Index
Fear – Rising yields and uncertainty about Federal Reserve rate cuts have pushed investor sentiment towards caution, as earnings season progresses.
Sector Performance
- Winners:
- Utilities and Real Estate: The only sectors posting gains, benefiting from investors’ shift to defensive assets.
- Semiconductors: Texas Instruments rose 4% after its Q3 profit exceeded expectations.
- Losers:
- Technology: Major tech stocks like Nvidia, Apple, Meta, and Amazon fell between 2% and 3.15%, dragging down the Nasdaq Composite.
- Consumer Discretionary: McDonald’s tumbled 5.12% after an E. coli outbreak linked to its products, while Coca-Cola slipped 2.07% due to cautious profit growth expectations.
Key Movers
- McDonald’s (MCD): Dropped 5.12% after reports of an E. coli outbreak linked to its Quarter Pounder hamburgers, which resulted in fatalities.
- Texas Instruments (TXN): Gained 4% after reporting stronger-than-expected third-quarter profits.
- AT&T (T): Rose 4.60% after exceeding expectations for new wireless subscribers.
- Tesla (TSLA): Fell during regular trading, but surged 8% in after-hours trading after beating profit margin estimates.
Economic Data
- Treasury Yields: The 10-year U.S. Treasury yield climbed to 4.222%, its highest level in three months, adding pressure to stocks as investors reconsidered the Fed’s rate-cut trajectory.
- Federal Reserve Beige Book: U.S. economic activity remained stable through September and early October, while firms saw a slight increase in hiring. Richmond Fed President Thomas Barkin hinted that the Fed’s fight to bring inflation to 2% may take longer than expected, which could delay interest rate cuts.
Outlook
As earnings season continues, rising yields and concerns about the Federal Reserve’s policy trajectory will likely create volatility in the market. Analysts expect a challenging period ahead, with the upcoming U.S. presidential election and economic data testing the resilience of the rally. Defensive sectors like utilities and real estate may remain in favor, while rate-sensitive tech stocks could continue to face pressure.
