Stocks fell Wednesday as Treasury yields tracked higher following the release of stronger-than-expected U.S. economic data.
The Dow Jones Industrial Average declined 94.45 points, or 0.25%, to close at 37,266.67. This marked the third straight day of losses for the 30-stock index. The S&P 500 slid 0.56% to close at 4,739.21, and the Nasdaq Composite lost 0.59%, ending the session at 14,855.62.
Charles Schwab shed 1.3% after reporting mixed quarterly results. Walgreens and Caterpillar both dropped about 3%, leading the Dow's losses. Meanwhile, Boeing advanced 1.3%, making it one of the biggest gainers in the Dow after recent sharp losses.
Retail sales data for December came in stronger-than-expected, indicating a resilient consumer and putting aggressive rate cuts from the Federal Reserve into doubt. Retail sales were up 0.6% from November, and gained 0.4% month-over-month, excluding autos. Economists polled by Dow Jones had estimated a 0.4% month-to-month increase in retail sales and 0.2% ex-autos.
The 10-year Treasury yield was last trading nearly 4 basis points higher at 4.102%, continuing its rise from Tuesday after Federal Reserve Governor Christopher Waller warned easing monetary policy may come slower than anticipated.
So far, traders are pricing in a roughly 57% chance that the Federal Reserve begins cutting rates in March as hopes mount for a pivot, according to CME Group's FedWatch tool.
"By the end of this year, rates will likely be lower than they are now — but it's not going to be a straight line," said Thomas Martin, senior portfolio manager at Globalt Investments.
"In the meantime, people who are positioned aggressively for more rate declines and for higher stocks, are maybe pulling in their horns and getting a little bit more diversified. You do want to hold bonds, but you also want to hold stocks," added Martin.
U.S. stocks ended Wednesday's trading session in the red.
The Dow Jones Industrial Average lost 94.45 points, or 0.25%.
The S&P 500 dropped 0.56%, and the Nasdaq Composite fell 0.59%.
— Hakyung Kim
To find the pockets of stock market strength in the early going in 2024 look no further than health care companies and financials broadly, and real estate investment trusts specifically, Strategas technical analyst Chris Verrone told clients in a note early Wednesday.
As of Tuesday's stock market close, the percentage of health care stocks in an uptrend climbed to the mid-50% area "from the mid-20s%" very quickly, Verrone noted, adding that healthcare performance is firming "under the surface," and still "supported by a very contrarian flow backdrop." The S&P 500 Healthcare Index is 2% higher for the year thus far in late day trading Wednesday, the best of the S&P's 11 sectors.
REITs are doing the same in terms of "underlying strength...with nearly 70% of issues in an uptrend (the sector's strongest reading in close to two years)," Strategas told clients. "REITs are consolidating after breaking out from a 2-year downtrend, with improvement under the surface as well."
— Scott Schnipper
Oil prices were mixed on Wednesday as investors weighed disappointing economic growth in China against a strong demand outlook from OPEC.
The West Texas Intermediate futures contract for February gained 16 cents, or .22%, to settle at $72.56 a barrel. The Brent futures contract for March lost 41 cents, or .52%, to settle at $77.88 a barrel.
Oil prices lost more than 2% earlier in the trading session after fourth-quarter economic growth in China missed expectations, raising worries about oil demand.
The two benchmarks recovered some of those losses as OPEC forecast robust oil demand growth in 2025 of 1.8 million barrels per day. The group expects oil demand to grow by 2.25 million barrels per day this year.
Supply and demand dynamics have largely overshadowed fears that mounting tensions in the Middle East could disrupt the market.
— Spencer Kimball
Bitcoin mining stocks were lower as the price of the cryptocurrency remained in the red on Wednesday.
Riot Platforms and CleanSpark were each down 3%, while Iris Energy and Marathon Digital fell 2% each. Bitcoin traded slightly under the flat line.
Mining stocks have long traded in tandem with bitcoin, with investors previously using them to gain exposure to the cryptocurrency's price. Now, following the launch of bitcoin ETFs last week, traders appear to be rotating out of miners and into the bitcoin ETFs themselves.
"Price has effectively been flat since the launch of the ETFs as capital is shuffling between various investment products investors have used and are using to gain exposure to bitcoin," Sam Callahan, analyst at bitcoin services firm Swan Bitcoin, told CNBC. "Over the long term, these ETFs will reduce the barrier to entry to bitcoin in a year where the Fed is expected to return to more accommodative monetary policy and bitcoin's issuance rate will be cut in half" – which should benefit the price this year.
— Tanaya Macheel
While traders remain hopeful that the Federal Reserve will cut rates in March, Verdence Capital chief investment officer Megan Horneman believes rates my not be lowered until the second half of 2024.
"Right now, looking at the economy, there's really no need for them to cut rates right now," Horneman said.
"Cutting interest rates when you have employment that's pretty low and a consumer who's still spending could 're-inflate' inflation, and that's a concern I think the Fed has," Horneman added.
— Hakyung Kim
Economic activity over the past seven weeks has been largely stagnant, with both hiring and prices rising at a "modest to moderate" pace, according to the Federal Reserve's Beige Book report released Wednesday.
The summary of conditions across the Fed's 12 districts found economic activity to be "relatively unchanged" since the last report on Nov. 29, 2023. From a sector standpoint, housing weakened as did the demand for mortgages amid elevated interest rates.
Companies reported that inflation weighed on consumer activity and noted difficulty in pricing power. Still, they said noted that wage pressures "remain elevated."
—Jeff Cox
Major insurance stocks were among the names trading at new highs on Wednesday.
Allstate, Chubb, Travelers and Progressive all hit new intraday all-time highs on Wednesday morning. Hilton and Visa also hit all-time highs, while Domino's Pizza was trading at its highest point since March 2022.
Some other names hitting new highs include:
Meanwhile, Archer-Daniels-Midland, Exxon Mobil and Pinnacle West Capital were all trading at their lowest level since 2022, while Devon Energy hit its lowest point since 2021.
— Jesse Pound, Christopher Hayes
These are the stocks moving the most in midday trading:
Read the full list of stocks moving here.
— Lisa Kailai Han
Oil prices fell on Wednesday after economic growth in China missed expectations.
The West Texas Intermediate futures contract for February declined 54 cents, or .75%, to trade at $71.86 a barrel. The Brent futures contract for March lost 97 cents, or 1.24%, to trade at $77.32 a barrel.
China's gross domestic product grew by 5.2% in the fourth quarter compared to the year prior, falling short of 5.3% growth forecast in a Reuters poll. Slower economic growth in China is raising concerns about oil demand in the world's second-largest economy.
Worries about China's economy combined with historic levels of oil production in the U.S. continue remain the main focus of investors, largely overshadowing geopolitical tensions in the Middle East.
— Spencer Kimball
The new year hasn't been so hot for stocks.
With 10 sessions completed in 2024's trading year, the three major indexes are on pace for losses. The Dow and S&P 500 have slid 0.9% and 0.5%, respectively, since 2024 began, while the Nasdaq Composite has dropped 1.3%.
That marks a turn from the rally seen into the end of 2023. The Dow and S&P 500 finished last year up by more than 13% and 24%, respectively. The technology-heavy Nasdaq soared more than 43%.
— Alex Harring
Keep an eye on technology juggernauts Apple and Nvidia, according to BTIG's Jonathan Krinsky.
"The two most important names to watch right now are probably Apple (AAPL, Not Rated), which is testing its 200 DMA (180.90) for the second time in a few weeks, and Nvidia (NVDA, Not Rated), which was up ~18% over the last 8 sessions as semis remain the hot momentum trade," the chief market technician said in a Wednesday note.
Apple is also retesting $180, which represented a key resistance level for the iPhone maker for toward the end of 2021 and 2022, Krinsky added.
"How these names react in the coming days likely will be very telling for the overall market," he wrote.
Apple shares have fallen 5.6% year to date, while Nvidia's added 12.7%. Both stocks declined nearly 1% during Wednesday's session.
— Samantha Subin
Real estate stocks were the biggest laggards in the S&P 500 on Wednesday, dragging the sector down 1.2%.
Boston properties was the biggest loser in the sector, last down nearly 3%, Prologis, Healthpeak Properties and Equinix declined more than 1% each.
Communication services, information technology and consumer discretionary also lagged, falling nearly 1% each. Semiconductor stocks On Semiconductor, NXP Semiconductors and Jabil fell about 3% each, while Enphase Energy and Fortinet lost 3%.
Popular media and major technology stocks pressured communications services, with Match Group down 2.3%. Walt Disney, Alphabet, and Take-Two Interactive lost at least 1%.
Elsewhere, Tesla, Ford Motor, Las Vegas Sands and Wynn Resorts fell at least 2% each, weighing on consumer discretionary.
— Samantha Subin
Small-cap stocks underwent a resurgence towards the end of last year, but they've sunk into the red this month, taking a seat behind large caps.
Looking at a weighted ratio chart of the S&P 100 and S&P 600 indexes, LPL Financial chief technical strategist noted that a rising ratio between the indexes is pointing to large-cap outperformance.
"After a sizable pullback from October to December — that included several support violations — the weighted and equal-weighted OEX vs. SML ratio charts are back above their uptrends and rising 200-day moving averages, implying large caps have once again recaptured the leadership reins," Turnquist said. "On the valuation side, smaller caps remain cheap, but value has mostly been out of favor compared to quality and growth, which is where larger caps are more tilted toward."
So far this month, the Russell 2000 index of small-cap companies has dropped 5.8%, while the S&P Small Cap 600 index has lost 5.6%. The S&P 500 benchmark stock index, in comparison, has shed 0.7%.
— Pia Singh
A stronger-than-expected retail sales report adds to the notion the Federal Reserve will wait later in the year to start lowering interest rates, and make fewer cuts than markets are currently pricing in.
"It would be later and fewer is the mantra," Sam Stovall, chief investment strategist at CFRA Research, told CNBC's "Squawk on the Street" on Wednesday. "We've been saying that, essentially, the Fed would start to cut interest rates in May of this year, and then actually cut by 25 basis points in each of the final three quarters of this year."
Investors have been trying to ascertain how a data-dependent Fed will proceed to lower rates in 2024. Currently, markets are pricing in six quarter-percentage point rate cuts this year, more than the three rate cuts policymakers indicated last month.
But a more moderate schedule would be an encouraging sign, Stovall said. The strategist expects later and fewer rate cuts would be indicative of a soft landing for the economy.
"If we did indeed get rate cuts to start sooner and to have more aggressive rate cutting schedule, I think that would imply that there are real problems with the economy," Stovall said.
— Sarah Min
Retail sales topped expectations, increasing 0.6% in December while economists expected a rise of 0.4%. Sales were driven by a pickup in clothing and accessory stores, as well as online nonstore businesses, indicating a resilient consumer.
Here's what analysts think the data means for the broader economy:
— Pia Singh
Traders are growing less confident that the Federal Reserve will start lowering interest rates in March.
Odds that a the first rate will come at the March 19-20 meeting fell below 60% on Wednesday morning, following stronger-than-expected retail sales data for December. That's considered an important level for Fed policymakers, who decide based on data but follow market expectations as well.
Chances for a March cut declined 59.1% heading into the stock market open, down about 10 percentage points from recent levels, according to CME Group data. Traders, however, still expect six rate cuts for the year.
—Jeff Cox
Boeing shares added 2.1% on Wednesday after the U.S. Federal Aviation Administration announced that it completed the inspections for the first group of Boeing 737 Max 9 planes.
The aircraft manufacturer has suffered heavy losses following the grounding of its 737 Max 9 planes in the U.S. after a midflight accident on an Alaska Airlines flight on Jan. 5.
To be sure, shares remain down nearly 22% month to date.
— Hakyung Kim
U.S. stocks began Wednesday's trading sessions in the red.
The Dow Jones Industrial Average slipped 152 points, or 0.4%. The S&P 500 and Nasdaq Composite lost 0.7% and 1%, respectively.
— Hakyung Kim
Federal Reserve Governor Michelle Bowman said Wednesday she is hopeful that compromises can be made on controversial new banking regulations set to take effect later this year.
"As I consider next steps, I am cautiously optimistic that policymakers can work toward a reasonable compromise, one that addresses two of the most critical shortcomings of the proposal: over-calibration and the lack of regulatory tailoring," Bowman said of looming changes in what are known as "Basel endgame" rules.
The proposals would raise capital requirements and significantly change the regulatory landscape for large banks in particular but also some regional institutions. Compliance is set to start in July 2025, with a multiyear phase-in. Some Wall Street banks have threatened to sue to keep the regulations from taking place.
"Public feedback has also assisted in identifying the aspects of the proposal that result in the most severe unintended consequences. In my mind, it will be necessary for policymakers to modify the proposal to mitigate these issues and concerns as we move forward," Bowman added.
—Jeff Cox
Shares of Charles Schwab slipped nearly 1% in premarket trading Wednesday after the firm reported fourth-quarter earnings. Profits for the quarterly period was significantly lower, but beat analysts' expectations.
Fourth-quarter earnings came out at 68 cents per share, excluding items, while analysts polled by FactSet forecasted 64 cents per share. Quarterly revenue was $4.46 billion for the period, falling slightly short of the $4.49 billion expected by analysts.
The firm's net income for the quarter dropped to $1 billion from $2 billion for the same period a year ago. Net income for the twelve months ending on Dec. 31 was $5.1 billion, the press release said, compared with $7.2 billion for the year-earlier period.
The stock has lost more than 6.5% so far this year.
— Pia Singh