S&P 500, Dow End Lower as Investors Await Insights on Fed Rates and Data, According to Reuters

By Echo Wang

The major stock indexes closed lower on Wednesday, retreating from recent record highs that had been buoyed by China’s extensive stimulus measures. Investors are now looking ahead to economic data and potential signals regarding forthcoming interest rate cuts.

Despite the drop, the three primary indexes are still on track for monthly gains following the Federal Reserve’s rate cut on September 18, which raised hopes for a soft landing for the economy. However, a disappointing consumer sentiment report released on Tuesday has sparked concerns about the strength of the labor market.

"What happened in commodities and basic materials, etc., was quite a reaction to … ‘hey, what if China can get growing again?’ And that kind of feeds into other areas, (and) it helps other economies," commented Tom Martin, senior portfolio manager at Globalt in Atlanta.

Long-term Treasury bond yields increased amid worries that looser financial conditions could rekindle inflation. The likelihood of a 50 basis point rate cut by the Federal Reserve at its November meeting has climbed to 57.4%, up from a 50/50 chance earlier in the week, according to financial market indicators.

The Dow Jones Industrial Average dropped 293.47 points, or 0.70%, settling at 41,914.75. The S&P 500 fell 10.67 points, or 0.19%, to 5,722.26, while the Nasdaq gained 7.68 points, or 0.04%, to reach 18,082.21.

The blue-chip Dow faced pressure after reaching record highs, primarily due to a decline in Amgen shares following mixed results on two of its drugs, raising concerns about increased competition.

So far this year, the S&P 500 and Nasdaq have surged about 20%, fueled by expectations of interest rate cuts and optimism surrounding artificial intelligence. However, the S&P 500 is currently trading at valuations significantly above long-term averages.

"Valuations are fairly high right now, sentiment is fairly high," Martin noted, indicating that some caution is emerging. "It’s hard to find bargains out there, because everything that has gotten hit, a lot of it has come back, and the market has broadened out."

Nine of the eleven sectors in the S&P 500 fell, with energy stocks leading the losses at 1.9%. In contrast, technology stocks saw a 0.5% increase, bolstered by a 2.14% gain in Nvidia shares.

New single-family home sales in the U.S. declined in August, but decreasing mortgage rates and falling house prices may boost demand in the coming months.

Looking ahead, the focus is on the weekly jobless claims and the August U.S. personal consumption expenditure index, both scheduled for release later this week.

Market participants will also pay close attention to remarks from Fed Governor Adriana Kugler, expected after the markets close, along with a speech from Fed Chair Jerome Powell at the New York Treasury Market Conference on Thursday.

Apple shares declined by 0.52% after data from a government-affiliated research firm indicated a drop in sales of foreign-branded smartphones, including iPhones, in China during August.

Shares of Citigroup, Bank of America, and JPMorgan Chase contributed to a 0.93% decline in the broader bank index. KB Home shares slid 5.35% following disappointing third-quarter profit results.

Hewlett Packard Enterprise led the S&P 500 with a 5.14% gain after receiving an upgrade from Barclays.

Meanwhile, shares of Ford and General Motors fell over 4% after Morgan Stanley downgraded its recommendations for both automakers.

Declining stocks outnumbered advancing ones by a 2.4-to-1 ratio on the NYSE, with 387 new highs and 56 new lows reported.

The S&P 500 recorded 36 new 52-week highs and two new lows, while the Nasdaq Composite noted 70 new highs and 110 new lows.

Trading volume on U.S. exchanges reached 10.42 billion shares, compared to the average of 11.69 billion shares over the past 20 trading days.