The S&P 500 and Dow rose while the Nasdaq extended declines on Wednesday, with growth stocks adding to losses spurred after a key policymaker suggested interest rates might need to rise to prevent an economic overheating.
The Dow added nearly 100 points, or 0.3%, to reach all-time intraday and closing highs. The Nasdaq lost 0.4% on Wednesday, after the index fell 1.9% during Tuesday's regular session for its worst day since March. The S&P 500 ended slightly above the flat line.
The sharp move lower in growth stocks a day earlier came after Treasury Secretary Janet Yellen suggested Tuesday that interest rates might need to rise to stave off an overheating in the economy, with economic activity picking back up much faster than expected as vaccinations take place and social distancing standards get eased. She added in later remarks, however, that a near-term interest rate hike was not something she was "predicting or recommending," as that decision lies with the Federal Reserve.
Still, some companies have also said that surging demand and supply chain shortages have pushed prices higher, hinting at signs of overheating that have worried some market participants. Mentions of inflation on first-quarter earnings calls have surged by 800% year-over-year, according to Bank of America strategist Savita Subramanian.
"I think to some extent the market is now taking a bit of a pause thinking that some of the best news may be behind us at this point on stocks, including the growth stocks, especially as we look to more reopenings," Rob Haworth, U.S. Bank Wealth Management senior investment strategist. "I think it's two-fold: One, a great earnings season that people wonder if it will be repeated, and two, looking more to that reopening story."
Plus, with stocks having reached record highs last week, equities were vulnerable to a pull-back at the slightest trigger, many strategists noted. And as first-quarter earnings season winds down, investors will be left to contemplate the future policy landscape, which may be somewhat less constructive for corporate profits.
"I do think there's a potential for a short-term bounce in volatility due to those excessive valuations and all of the uncertainty that currently stands with respect to the infrastructure spending bill, ultimately how it’s going to be funded, and certain taxation policies," Kevin Mahn, chief investment officer at Hennion and Walsh Investment Management, told Yahoo Finance.
"But, beyond the short-term bouts of volatility, there is continued reason for optimism, whether it’s consumer confidence, whether it’s the strength in earnings, recognizing that thus far we have an 86% beat rate for the companies that have reported," he added. "So there are reasons for optimism, but we would recommend that investors also consider adding diversification to their portfolios to help withstand those short-term bouts of volatility.”
2:41 p.m. ET: 'Stocks are tired' as investors react tepidly to strong earnings: strategist
The latest choppiness in the stock market is a sign of a "tired market," one strategist told Yahoo Finance, as investors search for new catalysts to propel the market after an already record-setting rally.
"Earnings have been off the charts – generationally amazing – and sellers are coming in," Paul Schatz, Heritage Capital president, told Yahoo Finance. "That's the classic sign of a tired market. It doesn't mean the bull market is over, but it certainly means stocks are tired. It's much easier for me to sell into that than bad news."
"On the buy front, I look for stocks that are about ready to do a leg higher, not that have gone like this," he side, gesturing steeply up and to the right. "They've been few and far between."
11:52 a.m. ET: Dow hits record high, indexes gain
Here's where markets were trading intraday on Wednesday:
S&P 500 (^GSPC): +20.45 points (+0.49%) to 4,185.11
Dow (^DJI): +156.41 points (+0.46%) to 34,289.44
Nasdaq (^IXIC): +75.02 points (+0.55%) to 13,710.17
Crude (CL=F): +$0.49 (+0.75%) to $66.18 a barrel
Gold (GC=F): +$6.80 (+0.38%) to $1,782.80 per ounce
10-year Treasury (^TNX): +0.2 bps to yield 1.594%
10:25 a.m. ET: Peloton shares drop after company announces recall of Tread+ treadmills
Peloton (PTON) shares sold off by more than 6% Wednesday after the company and the U.S. Consumer Product Safety Commission announced two separate voluntary recalls of the Peloton Tread+ and Tread treadmills. The announcement came following one child death and 70 safety incidents linked to the products.
"Consumers who have purchased either treadmill should immediately stop using it and contact Peloton for a full refund or other qualified remedy," according to the announcement. "Peloton has also stopped sale and distribution of the Tread+ and continues to work on additional hardware modifications."
Peloton CEO John Foley also conceded in the statement that the company "made a mistake in our initial response to the Consumer Product Safety Commission’s request that we recall the Tread+." Initially, Peloton refuted the CPSC's earlier recall request from April, calling the agency's claims "inaccurate and misleading."
10:20 a.m. ET: U.S. service sector activity unexpectedly cooled in April: ISM
U.S. service sector activity unexpectedly cooled in April after rising in March, with supply chain disruptions and price pressures beginning to weigh on the expansion.
The Institute for Supply Management's April purchasing managers' index (PMI) came in at 62.7 in April from 63.7 in March. Consensus economists were looking for a print of 64.1, according to Bloomberg consensus data. Readings above the neutral level of 50.0 indicate expansion in a sector.
Beneath the headline figure, prices accelerated in April, and ISM highlighted that a survey respondent said "there is pricing pressure for goods and services in the market.” Business activity and production slowed, as did new orders.
9:30 a.m. ET: Stocks rebound, opening higher after tech rout
Here were the main moves in markets as of 9:30 a.m. ET:
S&P 500 (^GSPC): +18.89 points (+0.45%) to 4,183.55
Dow (^DJI): +69.11 points (+0.2%) to 34,202.14
Nasdaq (^IXIC): +99.49 points (+0.73%) to 13,734.18
Crude (CL=F): +$0.58 (+0.88%) to $66.27 a barrel
Gold (GC=F): +$5.20 (+0.29%) to $1,781.20 per ounce
10-year Treasury (^TNX): +0.8 bps to yield 1.6%
9:04 a.m. ET: Facebook's oversight board upholds site's decision to suspend Trump's account, calls for review of Facebook's content policies
Facebook's Oversight Board announced on Wednesday it ruled to uphold the company's suspension of former President Donald Trump from Facebook and Instagram. The social networking company had suspended Trump's accounts indefinitely in January, after saying "the risks of allowing the president to continue to use our service during this period are simply too great" amid the Capitol riots earlier this year.
"Trump’s posts during the Capitol riot severely violated Facebook’s rules and encouraged and legitimized violence," the Oversight Board said in a statement on Twitter.
The board added, however, that it "a found Facebook violated its own rules by imposing a suspension that was ‘indefinite.’ This penalty is not described in Facebook’s content policies. It has no clear criteria and gives Facebook total discretion on when to impose or lift it."
"Within 6 months of today, Facebook must review this matter and decide a new penalty that reflects its rules, the severity of the violation, and prospect of future harm," the board wrote. "Facebook can either impose a time-limited suspension or account deletion."
8:28 a.m. ET: Private payrolls rose by 742,000 in April, missing expectations: ADP
Private payrolls rose less than expectedin April, but still increased by the most since September as COVID-19 vaccinations and reopenings stoke economic activity.
U.S. employers added back 742,000 payrolls last month,ADP said in its closely watched monthly report on Wednesday. This followed a revised rise of 565,000 jobs in March. Consensus economists were looking for private payrolls to increase by 850,000, according to Bloomberg data.
As has been the case over the past few months, the service-providing sector saw most of the job gains, with these rising by 636,000. But the goods-producing sector also saw more job gains, with payrolls up by 106,000 for the month as rising demand for manufactured goods helped fuel employment increases.
7:20 a.m. ET Wednesday: Stock futures rise, with equities poised to rebound after Tuesday's tech selloff
Here's where markets were trading ahead of the opening bell Wednesday morning:
S&P 500 futures (ES=F): 4,170.5, up 12.25 points or 0.29%
Dow futures (YM=F): 34,083.00, up 63 points or 0.19%
Nasdaq futures (NQ=F): 13,601.50, up 65.50 points or 0.48%
Crude (CL=F): +$0.71 (+1.08%) to $66.40 a barrel
Gold (GC=F): +$0.40 (+0.02%) to $1,776.40 per ounce
10-year Treasury (^TNX): +1.1 bps to yield 1.603%
6:13 p.m. ET: ET Tuesday: Stock futures edge lower
Here's where markets were trading as the overnight session kicked off:
S&P 500 futures (ES=F): 4,157.25, down 1 point or 0.02%
Dow futures (YM=F): 34,018.00, down 2 points or 0.01%
Nasdaq futures (NQ=F): 13,519.00, down 17 points or 0.13%
Emily McCormick is a reporter for Yahoo Finance. Follow her on Twitter: @emily_mcck
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