The S&P 500 fell Wednesday, the first day of March, as traders struggled to recover their footing following a losing month and bond yields continued their climb.
The broad market index fell 0.47% to 3,951.39, while the tech-heavy Nasdaq Composite lost 0.66% to close at 11,379.48. The blue-chip Dow Jones Industrial Average ended the day just above the flatline at 32,661.84, a gain of 5.14 points.
The moves came as bond yields extended their February gains, with the benchmark 10-year yield briefly topping 4% for the first time since November. The 1-year Treasury yield rose above 5%.
Minneapolis Federal Reserve President Neel Kashkari said Wednesday that he's "open to the possibility" of a larger interest rate increase at this month's policy meeting, "whether it's 25 or 50 basis points," but hasn't made up his mind yet.
"We are currently in the chop period between central banks winding down interest rate increase cycles and seeing what impact those increases will have on the real economy," said William Northey, senior investment director at U.S. Bank Wealth Management. "Performance for the first two months of the year was primarily influenced by marginal changes in expectations for the appropriate path of monetary policy in 2023."
"We anticipate a better environment for bonds but expect ongoing, two-sided volatility for global equities and U.S. equities as market gauges consumer health and corporate activity," he added.
Stock market sentiment initially got a boost after the release of much stronger-than-expected data out of China. The country's National Bureau of Statistics said its official manufacturing PMI rose to 52.6 in February — a high not seen since April 2012.
The moves come after Wall Street closed out a losing February for stocks on Tuesday. February's slide dragged the Dow into negative territory for the year, while the other two indexes are still holding onto their gains.
Goldman Sachs shares fell for a second day after CEO David Solomon outlined his rebooted plan to improve returns at the investment bank.
Shares of the New York-based company dipped 0.8% Wednesday, adding to Tuesday's 3.8% decline.
Analysts weighed in with mixed reviews of Solomon's effort. Wells Fargo's Mike Mayo said in a research note that while he had confidence in Goldman hitting its returns target, he wasn't sure when that would happen.
"The issue is lack of time frame, and especially ongoing uncertainty with the resolution of underperforming consumer/platform solutions," Mayo wrote. "To us, this contributes to the stock price decline today."
The consumer operations Goldman still has, which may or may not be sold, "remains an albatross and the stock lacks short-term catalysts," he added. Still, Mayo rates Goldman "overweight."
Goldman's valuation "offers an opportunity to add exposure to a best-in-class capital markets and asset management franchise with ongoing self-help" from buybacks and expense cutting, wrote Bank of America's Ebrahim H. Poonawala, who reiterated his "buy" rating on the company.
Morgan Stanley's Betsy Graseck said the event was "in line" with her expectations, but wasn't convinced the bank will achieve their targets.
"Looking forward over the next three years, we model GS delivering ROE above 2022's 10% level but below their 14-16% target as market activity normalizes," Graseck wrote.
—Hugh Son
The S&P 500 and Nasdaq Composite closed lower on Wednesday.
The broad market index fell 0.47% to 3,951.39, while the tech-heavy Nasdaq Composite lost 0.66% to close at 11,379.48. The blue chip Dow Jones Industrial Average ended the day just above the flatline at 32,662.56, 5.86 points higher.
— Tanaya Macheel
Redburn is increasingly optimistic about how Spotify shares will perform going forward.
Analyst Agnieszka Pustula upgraded the stock to buy from neutral, citing the likelihood of gross margins beating consensus expectations. Pustula price target of $140 implies the stock could rally 20.4% from where it closed Tuesday.
"It does not take a lot of optimism to see Spotify's gross margin beating consensus expectations," Pustula said in a Wednesday note to clients.
Pustula also said the company could raise prices, which would help its revenue growth. Meanwhile, Pustula praised the music streaming platform for its "resilient" subscriber growth.
— Alex Harring
Oakmark Funds' manager Bill Nygren is confident in Capital One even as prospects of further interest rate hikes from the Federal Reserve are rattling investors.
"For people that are pulling out their recession playbook based on the last two recessions, there's a lot of concern about what will happen to charge offs in Capital One, but we take great confidence in how strong the market is for unskilled labor right now," Nygren said on CNBC's "Squawk on the Street."
"People pay their credit card bills and their auto bills as long as they've got jobs," he continued. "So we think that investors might be overestimating the weakness that you could see in not only Capital One, but the rest of the financial sector, if we do go through a moderate recession."
Nygren said that he believes higher interest rates will have more of an impact on the housing sector, rather than credit card payments.
"I think that's probably more of a risk for the housing sector where you're looking at very long term interest rates," said Nygren.
"For a credit card loan, change in in near-term rates just doesn't change the payment all that much."
— Hakyung Kim
U.S. companies doled out a record high in dividends last year, but higher interest rates are expected to continue slowing dividend growth throughout 2023, according to the latest Janus Henderson Global Dividend Index.
Dividends rose to $574.2 billion, an increase of 7.6%, in 2022. Oil producers accounted for a third of this growth while financials were another third, according to a Wednesday note from Janus Henderson. U.S. oil companies saw soaring cash flows last year due to high energy prices. Financial giants Wells Fargo, Morgan Stanley and Blackstone were the largest contributors to the growth, the note said.
The telecommunications sector was the sole weak spot, the note said, pointing out that growth was significantly impacted after AT&T cut its annual dividend nearly in half to $1.11 per share in February of last year.
While dividends reached an all-time high, the firm said that U.S. dividend growth slowed in each successive quarter in 2022, dropping from 10.4% in the first quarter to 5.5% in the fourth quarter. The vast majority, or 94%, of U.S. companies raised or maintained their dividend payments last year.
Global dividends rose 8.4% to a record $1.56 trillion and slowed to 7.8% by the fourth quarter, the firm said, expecting that growth rate to down in the current year.
– Pia Singh
The 10-year Treasury yield took another run at 4%, as stocks chopped lower in afternoon trading.
The 10-year was at 4.004% in mid-afternoon. The 10-year yield breached 4% for the first time since Nov. 10 in late morning trading, but backed off below that level temporarily. Yields move opposite price.
Traders have been watching the negative correlation between stocks and the benchmark 10-year's move to the key 4% psychological level. Chart strategists say the level is not important resistance, but it is important in terms of the impact on investor sentiment.
Tech and growth stocks are particularly sensitive to moves in the 10-year yield. The Technology Select Sector SPDR Fund, which repesents the tech names in the S&P 500, was off 0.8%.
Bond strategists expect the 10-year yield to continue to rise, ahead of the Fed's March 22 rate decision. Any strong inflation or even jobs data could be a catalyst for a move higher.
Michael Schumacher of Wells Fargo said the 10-year could easily reach 4.20% in the near term.
—Patti Domm
Stocks look "increasingly susceptible to a potentially intense" pullback in March, unless economic data weakens, corporate earnings show more consistent strength and geopolitical tensions start to calm (as with Russia and China), according to Greg Bassuk, CEO at AXS Investments.
"With market volatility likely to persist in March as investors digest the pending release of new economic, corporate and geopolitical data and developments, investors would be prudent to brace for a near-term market rollercoaster as both Wall Street and Main Street process and position for the months ahead," he said.
Economic data remains the investor narrative for March with all eyes laser focused on February's inflation print.
"Just as the February sell-off was sparked by the strong January jobs report and a multitude of robust growth and inflation readings, Wall Street and Main Street eagerly await upcoming economic data to decipher the trajectory of the job market and inflation to gauge the likely actions of the Fed in March and throughout 2023," he added.
— Tanaya Macheel
U.S.-listed shares of Nio slid about 4% after the Chinese electric vehicle maker reported a wider-than-expected operating loss of 6,736.1 million Chinese Yuan ($976.7 million U.S.) for the fourth quarter. That's a much wider loss from the year prior.
"While vehicle revenue of Rmb14.8bn (+24% QoQ) came in largely in-line, vehicle gross margin of 6.8% (down 9.5ppt QoQ) surprised on the downside. The company attributed the drastic margin contraction to: 1) inventory provisions; 2) accelerated depreciation on production facilities; and 3) losses on purchase commitments to suppliers for NT1.0 models," said Morgan Stanley analyst Tim Hsiao, who has an overweight rating on the stock.
The automaker also provided weak guidance, Citi analyst Jeff Chung pointed out. He has a buy rating on the stock, but emphasizes it is a high-risk investment "given the company's start-up positioning, early stage of product deliveries, other operational risks, the risk of original financial investors selling stakes in the future,as well as the shares' relatively brief trading history."
UBS, on the other hand, is neutral on the stock, calling it "our least preferred EV name under our coverage."
— Michelle Fox
Greenlight Capital's David Einhorn said Wednesday he's keeping his negative stance on the stock market as inflation and interest rates could surprise to the upside.
"I think we should be bearish on stocks and bullish on inflation," Einhorn said on CNBC's "Halftime Report." "I think we're in a policy now, which is probably pretty good for Main Street, but it's going to be difficult and increasingly difficult for financial assets."
Einhorn just scored "an exceptionally good year" with a 36.6% return in 2022, thanks in part to his short position in a slew of innovative technology stocks like those touted by growth investor Cathie Wood.
— Yun Li
The 10-year Treasury yield briefly crossed above 4% for the first time since Nov.10 but backed off in late morning trading.
The 4% level is viewed as a key psychological milestone for investors, and stocks fell to the lows of the day after the move. The S&P 500 has since reversed much of those losses, and the 10-year was at 3.96% at midday.
"As the yield backed off, stocks lifted a little bit so you still have this direct correlation everytime the 10-year makes a new weekly high. Equities don't like it," said Scott Redler, partner with T3Live.com.
— Patti Domm
March is off to a cloudy start, with the S&P 500 and Nasdaq Composite trading lower midday, continuing February's losses.
As of noon ET Wednesday:
The 10-year U.S. Treasury yield briefly touched 4.006%, crossing the 4% level for the first time since November. Yields across the board extended gains, putting pressure on stocks.
– Pia Singh
The percentage of bulls in the latest weekly survey of financial newsletter editors slid to 38.4% from 44.4%, Investors Intelligence said.
Newsletter bullishness ended February about 10% below their recent peak in January, II said, adding that, "as contrarians, we view [the] shift as positive, suggesting that the fully invested stance seen at market tops is not close, and there is lots of sideline cash that is still available for buying stocks."
The degree of bearishness rose to 28.8% from 26.4% a week earlier, while the number of advisers believing in a near-term stock market correction widened to to 32.8% from 29.2%.
The expanding number of newsletters arguing for a correction at the same time as the stock market is weakening is a worrying condition, II said. Typically, the correction camp would expand when prices are rising, so the latest move "suggests at least some in this category may shift to long term bearishness...We are watching anxiously for their next reaction," II said.
— Scott Schnipper
Tesla shares fell heading into the company's investor day livestreamed from its Texas factory on Wednesday.
Many investors and analysts will be watching for updates on the company's battery and energy business, along with progress on FSD Beta.
The move in shares comes as the electric vehicle maker on Tuesday said it plans to build a new plant in Mexico and just weeks after the company cut prices to fuel demand.
So far this year, Tesla shares have been on a tear, surging 67% after a 65% slump in 2022.
— Samantha Subin
It's time for investors to step away from card issuer Marqeta, according to JPMorgan.
The firm lowered its rating for Marqeta to neutral from overweight. It also slashed its price target to $6 from $9. The new price target implies only a 3.4% upside from Tuesday's close price.
"While we like the strategic value and long-term operational improvements being put in place at Marqeta, we feel it is time to move to the sideline," analyst Tien-tsin Huang wrote on Wednesday in a client note.
CNBC Pro subscribers can read more about his downgrade here.
— Hakyung Kim
Manufacturing remained in contraction during February as production and new orders slowed, the Institute for Supply Management reported Wednesday.
The closely watched ISM Manufacturing Index registered a 47.7% reading, representing the percentage of companies reporting expansion. A reading below 50% represents contraction.
Economists had been looking for a headline reading of 47.8%, according to Dow Jones.
In the details, new orders rose but remained in a pullback at 47%, while the production index edged down to 47.3%. Importantly, inflation re-emerged in the sector, with the prices index jumping 6.8 percentage points to 51.3%. Employment nudged down into contraction territory with a 49.1% reading.
—Jeff Cox
Minneapolis Federal Reserve President Neel Kashkari said Wednesday that he's open to the possibility of a larger interest rate increase at this month's policy meeting, but hasn't made up his mind yet.
"I'm open-minded at this point about whether it's 25 or 50 basis points," the central bank official said during an event in his home district.
A voting member on the rate-setting Federal Open Market Committee, Kashkari said the "dot plot" of individual members' future expectations will be more significant than what's decided at the March 21-22 meeting.
He noted that his "dot" was higher than most of the other FOMC members at the last meeting, when the committee stepped back the level of previous hikes to a quarter-point move. Kashkari indicated the he again is likely to tilt to the hawkish side in view of recent data that shows inflation remains high despite all the rate increases over the past year.
"At this point I have not decided what my dot is going to look like, but I lean towards continuing to raise further. I would continue to push up my policy path," he said.
—Jeff Cox
U.S. equities fell on Wednesday, the first day of March.
The Dow Jones Industrial Average dipped 64 points, or 0.2%. The S&P 500 fell 0.2%, and the Nasdaq Composite hovered under the flatline.
The outlook for Rivian Automotive remains positive even after the electric vehicle startup reported mixed fourth-quarter earnings, and issued a lackluster production outlook, according to Wall Street analysts.
Rivian shares dropped more than 8% in premarket trading Wednesday after the firm posted a revenue miss in its latest quarter, according to consensus estimates from Refinitiv. It also reported a smaller-than-expected loss.
Meanwhile, Rivian's 2023 vehicle production guidance of 50,000 vehicles was below the estimates of several Wall Street analysts.
Even so, analysts on Wall Street maintained a buy rating on the stock, according to consensus estimates on Refinitiv. Their average price target of $37.05 suggests Rivian shares can surge more than 90% from Tuesday's close.
Still, for Goldman Sachs' Mark Delaney, the results warranted a neutral rating for the stock, saying lower operating expenditures and strong demand offset the slower production figures. He has a 12-month price target of $18 on the stock. Rivian shares closed Tuesday at $19.30.
"While we continue to expect the company to have improved traction long-term, we would look for more visibility on an improved production ramp and timeline to profitability to be more positive on the stock and maintain our Neutral rating," Delaney wrote to clients on Wednesday.
Meanwhile, Bank of America's John Murphy maintained a buy rating on the stock, saying Rivian is "still in right place/time with right product/strategy." He has a $50 price objective, implying shares could soar more than 150% from Tuesday's close.
"[The] company is one of the most viable among the start-up EV automakers and also a relative competitive threat to incumbent OEMs (and possibly to other automotive-related verticals)," Murphy wrote Wednesday.
— Sarah Min
U.S. equity futures fell into the red as bond yields continued to climb higher.
The benchmark 10-year Treasury yield was up by 3 basis points at 3.947%, after it climbed as high as 3.983% on Tuesday, reaching levels last seen in the first half of November.
The yield on the 2-year Treasury was last trading at 4.839% after rising by just over 4 basis points. The 1-year yield climbed more than 3 basis points to over 5%.
— Tanaya Macheel
Here are the companies making headlines before the bell on Wednesday:
Click here to read more companies making moves before the open.
— Pia Singh