Wall Street slumped on Wednesday, led lower by megacap stocks as Treasury yields climbed and investors grew less confident about the outlook for strong rate cuts from the Federal Reserve, while corporate news pressured McDonald’s and Coca-Cola.
The Dow Jones Industrial Average tumbled more than 600 points before finishing down 409 points, or 1% at 42,514.95. It was the blue-chip index]’s worst day in over a month.
The S&P 500 lost 0.9%, and the Nasdaq dropped 1.6%. The Dow and benchmark and S&P 500 log their third consecutive day of declines.
Benchmark 10-year US Treasury yields reached a three-month high with investors reassessing the Fed rate-cut outlook over the next few months against the backdrop of strong economic data and the upcoming presidential election.
“What’s driving things more than anything else is the backup in rates,” said Thomas Martin, senior portfolio manager, Globalt Investments, adding the closer the electoral race gets, markets are likely to get more jittery.
Rate-sensitive megacaps took a hit, with Nvidia down 2.8% and Apple off 2.2%, pulling Information Technology stocks 1.7% lower and dragging on the tech-laden Nasdaq.
McDonald’s slumped 5% after an E. coli infection linked to its Quarter Pounder hamburgers killed one and sickened many.
Coca-Cola dipped 2.1% after the company reiterated its annual profit growth forecast despite expecting higher revenue.
“You also have to balance the fact that the US equity market is expensive on a valuation basis, so we could (be) due for profit-taking,” said Michael O’Rourke, chief market strategist at JonesTrading.
US markets are near record-high levels, but a combination of earnings, a changing monetary policy outlook and the upcoming presidential election will test the sustainability of the recent rally and could trigger some market volatility, analysts said.
Richmond Fed President Thomas Barkin said the central bank’s fight to return inflation to its 2% target may take longer than expected, limiting interest rate cuts.
Boeing dropped 1.8% after reporting a quarterly loss of $6 billion owing to a crippling strike.
Factory workers at the troubled planemaker will vote later in the day on a new contract proposal that could end the more than five-week-long standoff.
Meanwhile, Starbucks pared steep premarket losses to rise 0.9% after suspending its annual forecast on Tuesday.
Semiconductor company Texas Instruments gained 4% after its third-quarter profit beat forecasts, while AT&T rose 3.8% after gaining more wireless subscribers than expected in the third quarter.
