Wall St ends down sharply; yields rise again, investors assess earnings

For days now, the Wall Street mantra has been, “the market often ignores geopolitics” (which really isn’t at all true but whatever allows investors to sleep at night) and certainly today the sentiment reversed. The mounting tensions have stoked risk aversion allowing safe haven Treasury yields to rise and stocks to take a big dive straight down on all three indexes, the Dow and Nasdaq both down well into 3-digits. There is also some sector rotation going on with investors trying to second guess which stocks are going to do well and which ones will not in this rapidly changing new environment. On the Q3 front, P&G beat market expectations while United Airlines came in below. Volume is up today just a tad above the 4-week average at 10.48 billion. 

Wall St ends down sharply; yields rise again, investors assess earnings

By Caroline Valetkevitch

Wed October 18, 2023 4:02 PM

DJ: 33,997.65  +13.11         NAS: 13,533.75  -34.24         S&P: 4,373.20  -0.43        10/17

DJ: 33,665.08  -332.57        NAS: 13,314.30  -219.44       S&P: 4,314.60  -58.60      10/18

NEW YORK, Oct 18 (Reuters) - U.S. stocks ended sharply lower on Wednesday with Treasury yields rising again and investors assessing the latest batch of quarterly corporate results and forecasts.  Mounting tensions in the Middle East stoked risk aversion. Safe-haven gold hit its highest in more than two months while the Cboe Volatility index (.VIX), Wall Street's fear gauge, rose.  Yields edged higher after data showing U.S. single-family homebuilding rebounded in September, stoking the view that the Federal Reserve will keep interest rates higher for longer.

"We're in a period of sector rotation, and people are trying to figure out in this new environment - in a full reset of rates across the curve - what are the stocks that are going to continue to do well and what are the stocks that are going to suffer," said Rick Meckler, partner at Cherry Lane Investments, a family investment office in New Vernon, New Jersey.  "Obviously, companies that are highly leveraged have difficulties in this kind of a market."  Higher yields make stocks less attractive than risk-free government bonds.

On the earnings front, Procter & Gamble (PG.N) shares gained after its quarterly sales topped market expectations, while United Airlines Holdings (UAL.O) shares plunged after the company forecast weaker fourth-quarter profit due to higher costs. The S&P 500 passenger airlines index (.SPLRCALI) also dropped. 

The Dow Jones Industrial Average (.DJI) fell 332.57 points, or 0.98%, to 33,665.08, the S&P 500 (.SPX) lost 58.6 points, or 1.34%, to 4,314.6 and the Nasdaq Composite (.IXIC) dropped 219.45 points, or 1.62%, to 13,314.30.

Investors have been worried about repercussions of mounting turmoil in the Middle East. U.S. President Joe Biden arrived in Israel after an attack on a hospital in the Gaza Strip derailed plans for a diplomatic summit with Arab leaders as the Israel-Hamas conflict continued.  Also in earnings news, Morgan Stanley's (MS.N) third-quarter profit dropped less than expected as a strong performance in its wealth management division offset a hit from a lull in dealmaking. But its shares fell sharply.  Shares of Tesla (TSLA.O) and Netflix (NFLX.O), both of which are due to report after the closing bell, were also sharply lower. 

Volume on U.S. exchanges was 10.48 billion shares, compared with the 10.45 billion average for the full session over the last 20 trading days.

Declining issues outnumbered advancing ones on the NYSE by a 4.67-to-1 ratio; on Nasdaq, a 3.33-to-1 ratio favored decliners.  The S&P 500 posted 12 new 52-week highs and 25 new lows; the Nasdaq Composite recorded 25 new highs and 252 new lows.