The Dow Jones Industrial Average was trading lower Wednesday afternoon, but off the session’s worst levels, fueled by rising Treasury yields as investors weighed the impact of rising oil prices on inflation, the possibility of a government shutdown, an autoworkers strike and resumption of student loan repayments.
How are stock indexes trading
The Dow Jones Industrial Average
dropped 64 points, or 0.2% to 33,550
The S&P 500
was mostly flat at 4,272
The Nasdaq Composite
was up 20 points, or 0.2% to 13,086
On Tuesday, the Dow industrials fell 388 points, or 1.14%, to end at 33,619, suffering its largest one-day point and percentage decline since March 22, according to Dow Jones Market Data. The S&P 500 declined 1.5%, to 4,274, while the Nasdaq Composite dropped 1.6%.
What’s driving markets
The Dow Jones Industrial Average fell Wednesday afternoon, while off session lows, following positive economic data release from the Commerce Department, which showed orders for long-lasting or durable goods rose a strong-than-expected 0.2% in August and briefly boosted market sentiment in the early morning trade. Economists polled by the Wall Street Journal had forecast a 0.5% decline.
Durable-goods orders minus defense orders actually fell 0.7% last month, but the so-called core orders, which omits defense and transportation and is a proxy for broader business investment, rose 0.9%, the government said.
Such data “reflect a persistent corporate appetite to invest and make money, with business investment rising solidly in August,” according to José Torres, senior economist at Interactive Brokers.
Treasury yields have continued to climb, with the yield on the 2-year Treasury
up 7.2 basis points to 5.146% from 5.073% on Tuesday. The yield on the 10-year Treasury
rose 9.5 basis points, at 4.634%, according to FactSet data.
Melissa Brown, head of applied research at Axioma, said there’s nervousness in the financial markets that the Federal Reserve will still raise interest rates despite cooling inflation, so investors are afraid that policymakers will “mess it up by going too far.”
“We’ve already seen for the past couple of weeks the investor sentiment, particularly in the U.S., has become more negative,” Brown told MarketWatch via phone on Wednesday. “…our view is if sentiment is negative, bad news is going to be punished a lot. [If] good news is not [so] good, it’s certainly not going to be highly rewarded.”
MarketWatch Live Coverage: Government shutdown: Aid for food, housing on the line with 3 days left for deal
Jeffrey J. Roach, chief economist at LPL Financial said investors should expect a choppy market from the trifecta of a spike in energy prices, the restart of student loan payments, and a looming U.S. government shutdown due impasse over the budget deficit in Congress.
As a result, the Fed may end up being more patient and cautious as it assesses the economy as the unknown economic impact of a government shutdown will likely keep policymakers from altering their interest-rate policy, Roach said in emailed comments. “The current dynamics support our baseline view that a recession could begin by end of year or early next year if consumers pull back spending,” he added.
Meanwhile, U.S. oil prices were trading at their highest intraday levels in 2023, reviving inflation worries and adding to concerns of tight crude supply amid OPEC+ production cuts, while the dollar reached new 10 month highs.
The CBOE VIX index
Wall Street’s so-called fear gauge, briefly hit a four-month high above 19 on Wednesday. And the S&P 500’s (SPX) 14-day relative strength index, a closely watched momentum gauge, finished Tuesday’s session at 30.3, a fraction above the threshold of ‘oversold’ territory, and its lowest level of the year.
Companies in focus
Shares of Costco Wholesale Corp.
gained 1.9% on Wednesday after the warehouse club’s earnings topped Wall Street estimates, and the company’s chief financial officer said theft has not risen “dramatically” over the past year.
jumped 4.6% after the human resources services company reported fiscal first-quarter profit and revenue that rose above expectations, and nudged up its full-year outlook.
stock dropped 0.3% as the memory-chip maker is set to post its fiscal fourth-quarter results Wednesday after the market closes. The memory-chip maker is expected to report $3.95 billion in revenue, down from $6.64 billion a year earlier, according to FactSet.
— Jamie Chisholm contributed.