The Dow Jones Industrial Average slid on Wednesday as Wall Street resumed a holiday-shortened week and digested the latest Federal Reserve meeting minutes for insights into the state of monetary policy.
The 30-stock average lost 129.83 points, or 0.38%, to close at 34,288.64. The S&P 500 fell 0.2% to 4,446.82. The Nasdaq Composite slipped 0.18% to end at 13,791.65. Both the Dow and S&P 500 ended three-day win streaks.
Investors parsed minutes from the June 13-14 Fed meeting released Wednesday afternoon, in which most officials indicated further interest rate hikes could lie ahead. The minutes gave Wall Street additional context to the central bank's decision to skip a rate increase at the June meeting.
"There's no question that Fed rate hike policy continues to drive investors' thoughts related to the second half of the year's market trajectory and economic trajectory," said Greg Bassuk, CEO of AXS Investments.
"That continued aggressive rhetoric or messaging around their plans for the coming months … got investors a lot more skittish," he said. And it comes after they already began "talking about and contemplating the timing of when rates are going to start to drop later this year into 2024."
Data released Wednesday morning showed factory orders were weaker than expected in May. Later in the week, investors will watch for a batch of employment and wage data for insights into the strength of the labor market.
Markets closed early on Monday and were completely dark on Tuesday for the Fourth of July holiday. Last week, the Nasdaq closed out its best first half of the year since 1983, while the S&P 500 notched its best first-half advance since 2019, as a surge in interest in artificial intelligence buoyed investor optimism in stocks. The Dow was the laggard, rising just 3.8%.
— CNBC's Jeff Cox contributed reporting
Stocks closed Wednesday's session lower.
The Dow finished down 0.4%, while the S&P 500 and Nasdaq Composite each closed 0.2% lower.
— Alex Harring
Lumentum shares fell more than 4% after Barclays downgraded the maker of optical telecom components to underweight from equal weight. The bank's price target implies downside of more than 26% from Monday's close.
"[We had] downgraded to EW at earnings as we saw no catalyst through CY24 and viewed Telecom estimates as too high. Now the stock is 30% higher and has caught an AI tailwind that doesn't materially impact the fundamentals," Barclays said.
— Fred Imbert
Piper Sandler downgraded Coinbase to neutral from overweight, citing its recent lawsuit from the Securities and Exchange Commission. Coinbase shares declined 1.5% in Wednesday's session.
A lack of regulatory clarity also drove the downgrade, according to analyst Patrick Moley. While Moley noted that Coinbase shares have soared 126% year to date — with the stock surging 55% since June 6, when the SEC filed the suit — he said the appreciation has "likely been driven by a combination of rising crypto prices and a number of large asset managers filing for spot Bitcoin ETFs (some of which have named COIN as custodian)."
CNBC Pro subscribers can read more about the downgrade here.
— Hakyung Kim
The odds that Federal Reserve policymakers will raise their benchmark overnight lending rate another quarter point, to 5.25%-5.50%, at their next meeting on July 26 climbed even closer to a sure thing following the release Wednesday of the minutes from their June meeting, according to the CME FedWatch Tool.
As of mid-afternoon Wednesday, the probability the Fed will go in July climbed to 88.7%, up from 81.8% a week ago, according to interest rate traders. The odds that rates will be left unchanged fell to 11.3% from 18.2% last week.
Almost three quarters, or 73.2%, of interest rate traders think the fed funds rate will stand at 5.25%-5.50% by the conclusion of the September 20 Federal Open Market Committee meeting, up from 69.1% last week. Odds that rates will stand a half point higher, at 5.50%-5.75%, by the end of the September meeting are now 17.7%, little changed from 16.4% a week ago.
— Scott Schnipper
DA Davidson upgraded shares of electric vehicle maker Rivian to neutral on Wednesday after a beat on second quarter vehicle deliveries and news its van partnership with Amazon would enter the European market sooner than expected.
Rivian said it delivered 12,640 vehicles in the second quarter, which analyst Michael Shlisky says was a "low bar" given that Wall Street expected somewhere around 11,000 units. Shlisky was more optimistic on the timeline for the company's van to enter Germany for use by Amazon delivery drivers.
"While we envisioned RIVN would eventually enter Europe with its van (as well as the R2 passenger platform in a few years), the timing is much earlier than expected," he said.
Shares were up nearly 4% in afternoon trading.
— Brian Evans
The S&P 500 just finished its best half-year since 2019 — and Renaissance Macro chairman Jeff deGraaf says the broad market index could even reach 4,600 by the end of this year.
deGraaf was bullish on the market as far back as November 2022. He told CNBC's "Squawk on the Street" on Wednesday that he already sees the market rally broadening.
"I think we're in pretty good shape. The trends are good, the momentum starting to pick up a little bit. We're seeing an improvement in breath. All those things are important and should be able to propel the S&P to 4600," said deGraaf.
The S&P 500 was last trading near 4,445 as of Wednesday afternoon.
— Hakyung Kim
Stocks continued to trade lower with just under an hour to go until the closing bell.
The Dow was down about 120 points, or 0.3%. The S&P 500 and Nasdaq Composite each shed about 0.1%.
— Alex Harring
While tech stocks led the way higher for the market in the first half, Bank of America's Savita Subramanian expects other names to join in on the rally during the second half.
"Just to get to the historical average 12-mo. breadth of 50% by year end, about a quarter of stocks in the S&P 500 would have to climb at least 5.7% assuming the index stays flat through the year end," Subramanian said.
"We expect breadth to continue to broaden out as seen in June, and expect the equal-weighted index to outperform the cap-weighted index in 2H," she continued.
CNBC Pro subscribers can read more about her forecast here.
— Hakyung Kim
Federal Reserve officials still have a recession as the most likely base case for the U.S. economy, but there was growing optimism at the last meeting that a true "soft landing" could be achieved.
"Given the continued strength in labor market conditions and the resilience of consumer spending, however, the staff saw the possibility of the economy continuing to grow slowly and avoiding a downturn as almost as likely as the mild-recession baseline," the minutes said.
— Jesse Pound
Wedbush analyst Dan Ives said in a note to clients Wednesday that Microsoft could join Apple in the $3 trillion market cap club in the coming months.
"With AI the next step we believe on a sum-of-the-parts valuation that MSFT should join Apple in the exclusive $3 trillion club by early 2024," Ives said.
Microsoft's Azure cloud business is poised to be a beneficiary of the booming interest in artificial intelligence, and the company has also invested billions into OpenAI, the company behind ChatGPT.
Read more about Ives' prediction on CNBC Pro.
— Jesse Pound
The Federal Reserve expects to raise rates further from current levels, albeit at a slower-than-expected pace, a summary from the central bank's June meeting showed.
"Many [officials] also noted that, after rapidly tightening the stance of monetary policy last year, the Committee had slowed the pace of tightening and that a further moderation in the pace of policy firming was appropriate in order to provide additional time to observe the effects of cumulative tightening and assess their implications for policy," the minutes said.
— Fred Imbert, Jeff Cox
Bad news for contrarians. Financial newsletter editors "increasingly suggest buying stocks!," Investors Intelligence headlined its latest weekly survey.
"Sentiment readings showed more bulls as the editors read the markets and suggested new buying," II said.
Bulls rallied to 54.9% in the poll, up from 50.0% last week and higher even than 54.3% two weeks ago. It was the highest bullish reading since 57.2% in November, 2021, shortly before stocks' all-time high in January, 2022.
Bearish sentiment eased to 18.3%, the fewest since early January, 2022, from 18.6% last week. Those in the correction camp fell to 28.8% from 31.4% in the prior period. The bull-bear spread widened to 36.6 points from 31.4 points the week before — the widest positive spread since November, 2021. The spread was <21 points just seven weeks ago, II said.
— Scott Schnipper
Transocean shares rallied more than 5% after Citi upgraded the company to buy from neutral.
"We think Transocean is favorably positioned among offshore drilling peers given its sizable available fleet of idle rigs returning to work in the coming years and positioning in the Golden Triangle region," analyst Scott Gruber said.
Gruber added that the company is also well-positioned geographically among its peers, with the greatest exposure to the Golden Triangle region.
CNBC Pro subscribers can read more about the upgrade here.
— Hakyung Kim
Check out some of the companies making headlines in midday trading:
Read the full list here.
— Brian Evans
Utility and communication services stocks in the S&P 500 have been able to outperform Wednesday despite the broad market index inching down.
Both sectors were up more than 1% in the session. Real estate was the only other sector trading up with a 0.8% advance.
Materials weighed on the index with a nearly 2% drop, making it the worst performing sector.
— Alex Harring
Though the strength of the stock market's rally in the first half of 2023 was unexpected to some, Lori Calvasina, RBC Capital Markets' head of U.S. equity strategy, said it does make sense.
While Calvasina noted some of the drivers for the market rally have turned negative, others are still helping. She said investors should continue to watch specific sectors and trends in investor sentiment.
"This market is not crazy," she said on CNBC's "Squawk on the Street." "It's been quite rational. We're here for good reason."
— Alex Harring
General Motors shares were last up more than 1% after the automaker reported new vehicle sales numbers on Wednesday that showed an 18.8% year-over-year increase.
The Detroit-based company said that new vehicle sales for the second quarter totaled 691,978, up from 582,401 vehicles during the year-ago period, when General Motors grappled with slew of supply chain problems.
New vehicle sales also increased from the first quarter of 2023.
— Mike Wayland, Samantha Subin
Intel shares dragged on the Dow, which was the worst performer of the three major indexes on Wednesday.
The technology stock lost more than 2%, making it the biggest loser in the 30-stock index. By comparison, the average was down about 0.2% in the session.
Nike, Goldman Sachs, 3M and Dow, Inc. were also among the worst performers in the index, with all trading more than 1% lower in Wednesday's session. On the other hand, Walgreens and Boeing were the best performers and were both able to avoid the downturn with advances larger than 1% each.
— Alex Harring
Moderna shares more than 2% on Wednesday after announcing an agreement to develop and manufacture messenger RNA drugs in China.
"These agreements are focused on strengthening health security by targeting unmet needs and contributing to the ecosystem of medical solutions available to patients in China," a spokesperson for the biotechnology company told CNBC.
Chinese media outlet Yicai first reported on Tuesday that Moderna was planning to make its first investment in China potentially worth about $1 billion, and that CEO Stéphane Bancel was visiting Shanghai.
— Annika Kim Constantino, Samantha Subin
Jefferies says it's "all revved up" on car rental company Hertz.
The firm initiated coverage on Hertz with a buy rating and a $24 price target, implying shares jumping 30% from Monday's close.
"Our buy rating contemplates our view that pricing and margins can run structurally higher vs pre-COVID levels driven by a dysfunctional oligopoly turned functional, HTZ's more [return on assets-focused] mindset, and continued supply constraints," analyst Stephanie Moore wrote in a Wednesday note.
Shares gained more than 0.5% in morning trading on Wednesday.
To read more about the call, click here.
— Hakyung Kim