U.S. stock indexes on Wednesday turned higher, helped by a fall in Treasury yields and a surprise intervention from the Bank of England in the U.K. gilt, or government-issued bonds market, but Wall Street stocks were still in danger of recording a seven-day losing streak.
How are stock indexes trading
- The Dow Jones Industrial Average DJIA, +1.09% added 268 points, or 0.9% to 29,417
- The S&P 500 SPX, +1.14% gained 33 points, or 0.9% to around 3,681
- The Nasdaq Composite COMP, +10.51% gained 76 points, or 0.7% to about 10,904
On Tuesday, the Dow Jones Industrial Average fell 126 points, or 0.43%, to 29135, the S&P 500 declined 8 points, or 0.21%, to 3647, and the Nasdaq Composite gained 27 points, or 0.25%, to 10830. The Nasdaq Composite was down 32.6% from its record high from November last year.
What’s driving markets
U.S. stocks received some support from a fall in U.S. Treasury yields but not before the 10-year yield TMUBMUSD10Y, 3.774% early on Wednesday breached 4% for the first time since the 2008 crisis.
Bond markets have been leading stocks of late as investors fret that the Federal Reserve’s determination to combat inflation will continue to push borrowing costs higher, damaging the economy and corporate earnings.
“Our central market view has been that pressure towards tighter U.S. financial conditions is unlikely to end until the economy either enters a clear recession or shows sustained inflation progress,” wrote Dominic Wilson, economic analyst at Goldman Sachs.
“We’ve just seen a lot of yield volatility. And I do expect that to continue because we have a lot of mixed messages from an economic perspective coming in, and it’s a very uncertain time,” said Daniel Berkowitz, senior investment officer at Prudent Management Associates.
But news from the Bank of England that it was stepping into buy unlimited amounts of long-dated bonds helped stem losses. The U.K. central bank said the move was done on financial stability grounds after gilt yields soared and the pound slumped to a record low in the wake of last Friday’s budget announcements. The BOE also postponed a planned sale of gilts for next week. The yield on the 10-year gilt TMBMKGB-10Y, 3.990% skidded 52 basis points to 3.992%.
Still, what the Fed is doing is going to have a much bigger impact on the future direction of the U.S. markets, noted Berkowitz.
Between 8:35 a.m. and 2 p.m. Eastern, various topics are addressed by Atlanta Fed president Raphael Bostic; Chair Jay Powell; Gov. Michelle Bowman; Richmond Fed president Tom Barkin; and Chicago Fed president Charles Evans.
Also pressuring stock indexes was a 3% fall in Apple shares AAPL, -3.22%, amid reports the technology giant was halting plans to increase production of its new iPhones.
The S&P 500 index on Tuesday fell for its sixth session in a row, shedding 6.5% over that period, and recording its longest losing streak since the beginning of the COVID-19 pandemic in February 2020.
Indeed the benchmark stock index has lost ground in eight of the last nine sessions, leaving its 14-day relative strength index momentum gauge at 27, where a figure below 30 is considered oversold territory.
Around 45% of S&P 500 stocks were oversold, noted Tier 1 Alpha, the most since the COVID-19 induced market meltdown in early 2020.
Source: Tier1 Alpha
Companies in focus
- Semiconductor company and Apple Inc. supplier STMicroelectronics N.V. STM’s shares tumbled 3.4% Wednesday, after news that Apple is dropping plans to boost iPhone production because an expected surge in demand didn’t materialize.
- DocuSign Inc. DOCU, +4.70% plans to lay off 9% of its workforce as it embarks on a restructuring plan, the electronic-signature company disclosed Wednesday. The company’s shares went up 4.2%.
- Shares of VFC Corp. VFC, -1.23% fell 1.7% Wednesday, after the parent of Vans and The North Face apparel brands cut its full-year profit and sales outlook due to lower-than-expected fiscal second-quarter results.