Stocks cut losses after morning sell-off
US stocks fell on Wednesday afternoon as some sectors rallied after a morning marked by large losses
The S&P 500 lost 0.1%. The Dow Jones Industrial Average lost 86 points, or about 0.3%. The technology-focused Nasdaq Composite Index rose less than 0.1%.
Equity trading has been bumpy lately as investors grapple with soaring energy prices and a general upward movement in government bond yields. Just a day earlier, the S&P 500 recorded its 25th gain of at least 1% for the year. The market failed to maintain momentum on Wednesday, however, with all three major stock indexes starting the day lower.
It is not uncommon to see stocks swing between gains and losses. In fact, most of the big breakthroughs in the stock market this year have come as a result of large losses, according to an analysis by Frank Cappelleri, office strategist at Instinet. Mr Cappelleri added that he would not be surprised to see more choppy trade actions in the last quarter of the year.
Investors are currently grappling with multiple issues. Oil and gas prices have jumped, which some analysts say could fuel inflation further. Meanwhile, investors have had to contend with rising bond yields, which can push down tech stocks, whose future earnings are typically worth less in today’s currency when discount rates rise. Tech stocks have been among the main drivers of the overall market gains in recent years.
“At what point do central banks have to say, wait, two years, maybe that requires some policy adjustment?” Said Jane Foley, head of currency strategy at Rabobank. She pointed the finger at the Bank of England, which said it could hike rates in the coming months as energy price inflation rises.
Business news caused swings among individual stocks on Wednesday.
American Airlines shares fell 4.7% and JetBlue Airways fell 4.5% after Goldman Sachs analysts downgraded its ratings for both stocks, citing concerns over fuel costs and a slowdown in economic growth reducing airline profits.
Other airlines also fell, with Delta Air Lines down 2.4% and United Airlines down 2.8%.
Meanwhile, Palantir Technologies jumped 2.7% after it said it won a data and analytics contract with the U.S. military.
Government bond yields fell on Wednesday, although they remained near recent highs.
The yield on the 10-year US Treasury bill was last at 1.513%, from 1.528% on Tuesday. Yields fall as bond prices rise.
Abroad, the markets retreated.
The Stoxx Europe 600 slipped 1%, dragged down by shares of travel, leisure and retail companies. Aircraft maker Airbus and Jeep owner Stellantis fell 1.3% and 3.3% respectively.
Hong Kong’s Hang Seng fell 0.6% to its lowest level since October 2020.
In commodities markets, natural gas prices have soared while oil prices have retreated, but have remained a striking distance from multi-year highs.
Forecasts of colder weather and weak gas flows from Russia have caused the latest wave of natural gas price volatility, said Nick Boyes, senior analyst at Swiss energy producer and trader Axpo. Thin trading conditions also helped, traders and analysts said, as some companies faced margin calls and others ran into their credit limits.
Contracts for West Texas Intermediate, the main grade of US crude, fell 1.8% to $ 77.51 per barrel, falling even further from the $ 80 per barrel mark. WTI prices have not exceeded $ 80 per barrel intraday since November 2014.
Fluctuations in energy prices were reflected in European government bond markets. The yield on UK 10-year gilts climbed to 1.152% from 1.093% on Tuesday, before retreating. The UK is exposed to the global gas shortage because it has minimal amounts of fuel in storage.
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