U.S. stocks on Wednesday ended mixed, a day after Wall Street posted another record-breaking session. Chip names, which have been a fundamental driver of the current bull run, declined while Treasury yields were up slightly despite a strong 30-year bond auction.
The tech-heavy Nasdaq Composite (COMP:IND) slipped 0.54% to close at 16,177.77 points, while the S&P 500 (SP500) retreated 0.19% to settle at 5,165.31 points. The benchmark index in the previous session closed at a new record high. The blue-chip Dow (DJI) added 0.10% to conclude at 39,043.32 points, buoyed by extended gains in industrial conglomerate 3M (MMM).
Of the 11 S&P sectors, seven ended in the green, led by Energy. Technology topped the losers.
Market participants took a bit of breather on Wednesday, digesting a Wall Street rally that appears to be ignoring any negative signals and plowing ahead to new highs almost every day. Tuesday’s slightly hotter-than-expected consumer price index (CPI) report underscored the sticky nature of inflation and reinforced a continued cautious stance from the Federal Reserve. Yet, equities surged as the CPI data did little to dent overall market expectations of interest rate cuts.
According to the CME FedWatch tool, the odds of a 25 basis point rate cut by the Fed’s monetary policy committee at its meeting in June is now at about 58%, compared to around 63% a day ago. As for its meeting next week, the overwhelming expectation is for the central bank to hold steady on rates. The focus will be on the Fed’s updated dot plot of economic projections.
“(Today’s session) follows what has so far been a remarkable rally this year, with the S&P 500 (SP500) up nearly 9% and the Nasdaq (COMP:IND) within a stone’s throw from 10%. This pullback seems to be in response to the market digesting the rally so far, combined with a hotter than expected inflation rating the day prior resulting in the realization that interest rate cuts are still perhaps months away,” Daniel Jones, investing group leader of Crude Value Insights, told Seeking Alpha
“Some downward pressure certainly is being caused by the electric vehicle market, with many of those firms not faring particularly well as of late. Tesla (TSLA), for instance, is down nearly 32% year to date … As always, investors who are worried about current market conditions should focus on defensive names, particularly those that are value oriented. During turbulent times, those are the types of companies that should perform the best,” Jones added.
Treasury yields were higher despite a $22B 30-year bond auction trading through by more than 2 basis points, indicating strong demand. The 30-year yield (US30Y) was up 3 basis points to 4.35%, while the 10-year yield (US10Y) was up 4 basis points to 4.19%. The shorter-end more rate-sensitive 2-year yield (US2Y) was up 3 basis points to 4.63%.
See how Treasury yields have done across the curve at the Seeking Alpha bond page.
Turning to active stocks, Dollar Tree (DLTR) was a significant drag on the S&P 500 (SP500), slumping more than 14%. The discount store chain’s quarterly results and guidance disappointed investors, and the company said it planned to close about 600 Family Dollar stores in the first half of this year.