U.S. stocks battled back from heavy losses Wednesday to trade near unchanged. The recovery follows a strong day of trading Tuesday, when stocks had their biggest gains since March.
Traders are reacting to a new batch of earnings reports, and will also pay close attention to the Federal Reserve as it releases minutes from its September meeting, at which it raised interest rate.
How are benchmarks performing?
The Dow Jones Industrial Average DJIA, -0.18% fell more than 300 points in early trading, before paring those losses and briefly edging into positive territory. The Dow was down 28 points, or 0.1% to sit at 25,765. The S&P 500 SPX, -0.02% traded 1 point lower to 2,808, while the Nasdaq Composite Index COMP, -0.22% slipped 16 points, or 0.2%, to 7,629.
Read: Why a big, 1-day stock-market bounce doesn’t mean ‘blue skies ahead’
On Tuesday, the Dow YMZ8, -0.19% jumped 547.87 points, or 2.2%, to 25,798.42. The S&P 500 SPX, -0.02% gained 59.13 points, or 2.2%, to 2,809.92 with tech and health care among the strongest performers in a session where all 11 sectors finished higher. The Nasdaq Composite Index COMP, -0.22% climbed 214.75 points, or 2.9%, to 7,645.49. It was the biggest single-day advance for all three indexes since March 26.
What’s driving the market?
Thus far stock gains have been supported by stronger-than-expected corporate results and healthy economic data. However, concerns about rapidly rising interest rates may return to the fore with the rate-setting Federal Reserve scheduled to release an account of minutes from its Sept. 25-26 gathering, which delivered a third rate increase in 2018 as expected.
Minutes aren’t ordinarily a source of volatility, however, the outsize focus on Treasury rates—notably a rise in the yield on the 10-year Treasury note TMUBMUSD10Y, +0.12% to a seven-year high last week—that can raise corporate and individual borrowing costs may make a more detailed account of last month’s policy convention slightly more intriguing.
Fed minutes are scheduled to be released at 2 p.m. Eastern Time.
Meanwhile, the market continues to closely watch negotiations between the European Union and Britain as it attempts to exit from the trade bloc with a trade agreement in hand. The potential for a clash between Italy and the European Union over Rome’s budget plans is also in the spotlight.
Which data were in focus?
The number of new homes under construction fell 0.6% to a seasonally-adjusted annual rate of 1.201 million in September. The rate was 1% below last year’s levels. The numbers nearly matched the consensus forecast of 1.208 million produced by a MarketWatch survey of economists.
Permits for construction of new homes also fell 5.3% in September from the month before to a seasonally adjusted annual rate of 1.241 million. The number represents a 3.7% increase year-over-year, but still was weaker than average analysts expectations polled by FactSet for a pace of 1.28 million new permits.
What were analysts saying?
“We had a big day yesterday, and today’s open shows that volatility is not going away,” said Jeff Carbone, co-founder of asset management firm Cornerstone Wealth Group. With interest rates markedly higher today than even one month ago, investors will remain cautious, and the early morning downturn is evidence of this change in sentiment, he said. “But when you look at the fundamentals of the economy and the market, we expect the market to ultimately move upward.”
Mark Espisito, chief executive of Espisito Securities shared this optimism. “We still see a strong earnings season and a strong stock market for the next year or so,” he said. “Even when there is a pullback like this morning, it’s met with resistance.”
He argued that the reversal of steep early morning losses in the major indexes is proof that there is “consistent buying interest when markets move down,” because investors are still betting on a strong economy and strong earnings to power stocks higher.
Which stocks were in focus?
Shares of Netflix Inc. NFLX, +3.39% were on the rise a day after the company reported better-than-expected quarterly results. The stock was up 3.9%
Investors soured on shares of International Business Machines Corp. IBM, -6.27% after the company announced a revenue miss following the close on Tuesday. Shares were down 6%.
Shares of United Continental Holdings UAL, +5.80% are up 6, following news that executives raised their forecasts for 2018 profits, even as it missed analysts’ third quarter EPS estimates.
Tesla TSLA, -3.77% stock is down 3.2%, following an SEC filling by the company saying it plans to issue $20 million in stock that will be bought by the company’s founder, Elon Musk. The stock initially popped on the news, but reversed course after the market opened. The filing also announced that a federal court approved a settlement between Tesla, Musk and the Securities and Exchange Commission that has the company and its founder each paying $20 million in fines related to Musk’s proposal to take Tesla private.
Home Depot HD, -4.37% shares are down 4.2%, on falling housing starts data and new housing permit numbers that missed expectations.
Shares of companies in the cannabis industry garnered investor interest on the first day of legal, recreational marijuana use across Canada. Shares of three of four major, publicly listed cannabis firms were down in morning trading, though all have recovered some from session lows.
Aurora Cannabis ACB, -0.93% was hit hard after the bell, falling 12.5%, before paring losses to be down 1.2%.
Cronos Group CRON, -5.36% stock was down 5.8% in morning trading, while Canopy Growth Corporation WEED, -3.74% was down 3.9%
Shares in Aphria, Inc. APH, +3.21% however, rose 2.1% during morning trading.
How did other markets trade?
Asian stocks ended higher, with Japan’s Nikkei NIK, +1.29% jumping 1.3%, extending Tuesday’s rally in the U.S., while European indexes were trading slightly lower as Italian and British political uncertainty buffeted stock benchmarks.
Crude-oil prices CLX8, -2.50% fell, while gold prices GCZ8, -0.13% were up 1% as the U.S. dollar index DXY, +0.30% edged slightly higher early Wednesday.
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