As investors evaluated the most recent round of quarterly reports from firms and Treasury rates increased once more, U.S. equities saw a decrease during Wednesday’s afternoon trade.
Additionally, rising Middle East tensions dampened risk appetite, with gold prices among the day’s gainers.
After a notable uptick in U.S. homebuilding, yields gradually increased, supporting the belief that the Federal Reserve will maintain higher interest rates for an extended period of time.
We’re in a phase of sector rotation, and investors are attempting to determine which stocks will fare better and worse in this new environment—a complete reset of rates across the curve—according to Rick Meckler, partner at Cherry Lane Investments, a family investment office located in New Vernon, New Jersey.
“Obviously, companies that are highly leveraged have difficulties in this kind of a market, and there probably is a reset in terms of market multiple on some of the big growth names.”
Additionally, equities with higher yields are less appealing to investors looking for minimal risk and high income.
In terms of profitability, shares of Procter & Gamble increased as the company’s quarterly sales exceeded market forecasts, while shares of United Airlines Holdings decreased after the company predicted a lower fourth-quarter profit because of increased expenditures. Additionally, the S&P 500 Passenger Airlines Index fell.
The S&P 500 dropped 44.88 points, or 1.03%, to 4,328.32, the Nasdaq Composite slid 172.51 points, or 1.27%, to 13,361.24, and the Dow Jones Industrial Average sank 223.62 points, or 0.66%, to 33,774.03.
At the only stop of a Middle East trip that was delayed by a large explosion at a Gaza hospital, which U.S. President Joe Biden claimed seemed to have been committed by Israel’s enemies, Biden vowed support for Israel.
In other earnings-related news, Morgan Stanley’s profit for the third quarter decreased less than anticipated because to a robust performance in its wealth management segment, which more than made up for a decline in dealmaking. Yet, its stock dropped precipitously.
After the closing bell, investors were waiting for Tesla and Netflix to release their results. Shares of Netflix and Tesla dropped.
On the NYSE, declining issues outnumbered rising ones by a ratio of 3.94 to 1; on Nasdaq, the ratio was 2.87 to 1, favouring decliners.
The Nasdaq Composite had 22 new highs and 202 new lows, while the S&P 500 recorded 12 new 52-week highs and 19 new lows.