U.S. stocks fell on Wednesday as optimism for quick interest rate cuts faded on new jobs data and minutes from the Federal Reserve's latest meeting showed the timing of rate cuts remains uncertain.
The Dow Jones Industrial Average (^DJI) fell more than 0.7%, or 285 points, while the benchmark S&P 500 (^GSPC) fell about 0.8%. The Nasdaq Composite (^IXIC) fell nearly another 1.2% the day after a heavy session in which technology stocks lost nearly 1.6%.
Investors welcomed further signs of a slowdown in the US labor market on Wednesday. New data from the Bureau of Labor Statistics showed there were 8.79 million job openings at the end of November, the lowest level since March 2021. Economists surveyed by Bloomberg had expected 8.82 million job openings.
Hopes that the year-end market rally would extend into 2024 have taken a hit as stock indexes and bond prices fell at the same time, making for the worst start to the year in decades. Bonds fell for a fourth straight day, pushing the 10-year Treasury yield (^TNX) up nearly 4% before reversing in the afternoon. The 10-year Treasury yield closed at about 3.91% on Wednesday.
Read more: What the Fed's pause on rate hikes means for bank accounts, CDs, loans and credit cards
After the minutes of the last meeting of the US Federal Reserve were published on Wednesday afternoon, there were hardly any changes on the stock markets. The minutes showed that Fed officials believe “upside risks” to inflation have diminished.
“Almost all participants indicated that … a lower target range for the federal funds rate through the end of 2024 would be appropriate.” it said in the minutes.
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Wed, Jan 3, 2024 at 9:03 p.m. GMTThe late 2023 winners will be delayed until the beginning of 2024
Stocks closed lower on Thursday as some of Wall Street's most popular sectors in December lagged in trading on Wednesday.
Broadly speaking, the Dow Jones Industrial Average (^DJI) fell more than 0.7%, or 285 points, while the benchmark S&P 500 (^GSPC) fell about 0.8%. The Nasdaq Composite (^IXIC) fell nearly 1.2% after a heavy session in which technology stocks lost nearly 1.6%.
The S&P 500 is currently at its worst three-day price since October.
Much of the market movement contradicted the end of 2023 in the stock markets. Real estate fell more than 2% while the Russell 2000 fell more than 3%, marking its worst day since March 2023.
Both interest rate-sensitive sectors rallied in December as investors priced in a March rate cut by the Federal Reserve, but have now given back some gains as the market tempers rate cut expectations.
- Wed, Jan 3, 2024 at 8:33 p.m. GMT
The Fed euphoria-fueled rally that ended 2023 may have presented investors with an interesting conundrum.
With so many market participants crowding into risky areas of the market like the Russell 2000, financials and real estate through the end of last year, a resurgence in tech trading in January 2023 could be the market's biggest pain trade heading into 2024.
“Anecdotally, we have heard from clients and other sell-side firms that the equal-weighted index is likely to outperform, and that is becoming excessive consensus,” Ohsung Kwon, U.S. equity strategist at Bank of America, told Yahoo Finance.
As a result, Kwon's team at BofA believes that if the recent trend of market expansion in January does not continue and the cap-weighted S&P 500 and the Magnificent Seven rally in January, markets could face trouble.
“We are not necessarily calling for a mega-cap rally in 2024,” Kwon clarified, although overall the firm still expects the equally weighted S&P 500 and cyclicals to outperform.
At this point, BofA simply emphasizes that the once technology-driven market consensus has clearly shifted and this may be a point to keep an eye on in the upcoming market action.
Wed, Jan 3, 2024 at 7:58 p.m. GMTOil prices rise by more than 3% due to supply shortages, OPEC promises unity
Oil prices jumped on Wednesday after reports of a disruption in a major Libyan oil field and the oil alliance OPEC's commitment to unity.
West Texas Intermediate (CL=F) settled at $72.70 a barrel. Brent crude oil (BZ=F) closed at $78.25 a barrel.
The sharp increase came after protests forced the closure of El Sharara, a site that produces 300,000 barrels a day. The disruption heightens concerns about supply disruptions due to attacks in the Red Sea region.
On Wednesday, Iran-backed Houthi rebels said they had targeted a container ship heading to Israel. The move came after US Navy helicopters destroyed three Houthi boats on Sunday in response to a hijacking attempt in the Red Sea.
The threat of a wider conflict threatening oil production from Iran has pushed prices higher.
“The real threat to prices is Iran’s oil exports (nearly 2 million barrels a day), which could suddenly be withdrawn from the global market,” Dennis Kissler, senior vice president at BOK Financial, said on Wednesday.
Also on Wednesday, OPEC said its members “reaffirm their unwavering commitment to the shared goals of unity and cohesion” within the organization.
Recent production cuts by the Organization of the Petroleum Exporting Countries and its allies last year were met with skepticism by market participants. Last month, Angola announced it was withdrawing from the cartel over quota disputes.
- Wed, January 3, 2024 at 7:35 p.m. GMT
Fed minutes: Officials see “reduced” inflation risks
Federal Reserve officials appear increasingly confident that inflation will come under better control by the end of 2023.
“Participants considered that upside risks to inflation had abated, but noted that inflation was still well above the Committee's longer-term objective and that there remained risks that progress toward price stability would stall.” , says the press release.
Additionally, participants believed that the current policy rate was “likely at or near its peak for this tightening cycle,” but the actual trajectory would depend on “how the economy performs.”
Stock levels have barely changed following publication. The Dow Jones Industrial Average (^DJI) fell 0.3%, while the benchmark S&P 500 (^GSPC) fell about 0.4%. The Nasdaq Composite (^IXIC) fell about 0.9% after a heavy session in which technology stocks lost nearly 1.6%.
- Wed, Jan 3, 2024 at 6:39 p.m. GMT
Trend ticker on Wednesday afternoon
Sofi (SOFI) stock topped Yahoo Finance's trending ticker page on Wednesday; Shares fell nearly 13% as KBW's financial services business was downgraded to underperform from market perform. KBW analyst Mike Perito believes the recent surge in shares, which are up nearly 30% in the last month, may be overblown.
Shares of Xerox (XRX) fell more than 8% after the company said it plans to cut 15% of its workforce as part of an overhaul of its operating model.
Shares of Eli Lilly (LLY) rose nearly 4%, hitting their highest level in eight weeks. UBS on Wednesday listed Eli Lilly as a top pharma pick for 2024, citing upgrades to its weight-loss drug Mounjaro, among other things, as catalysts for the stock coming this year.
AMC stock (AMC) hit an all-time low on Wednesday. Since its inception as a meme stock, the stock has struggled with COVID lockdown reopenings and Hollywood strikes. In 2023, AMC shares lost 83%.
- Wed, Jan 3, 2024 at 5:29 p.m. GMT
Real estate slows down Wednesday trading
Rate-sensitive sectors have risen since early November as investors increasingly bet on a soft landing.
However, as some doubt has crept into this narrative heading into 2024, sectors like real estate (XLRE), which rose during the recent market rally, are giving back some gains.
Real estate was the biggest laggard among the 11 sectors on Thursday, falling nearly 2% by 12:30 p.m. ET. The S&P 500 (^GSPC) lost about 0.7%.
Source: Yahoo Finance
What's notable is that today's market moves come as investors' bets on a rate cut in March have faded. Investors have about a 75% chance of a cut in March, according to the CME-FedWatch tool. That's less than the 90 percent probability investors saw a week ago.
- Wed, January 3, 2024 at 4:35 p.m. GMT
According to the economist, there is currently “little hope” of a turnaround in the manufacturing sector
The December ISM manufacturing report released on Wednesday showed the sector contracted for the 14th straight month.
However, the index reading of 47.4 was higher than the previous month's 46.7 and above Wall Street estimates of 47.1.
But with the index just above its lowest level in six months, Jefferies US economist Thomas Simons does not yet see a turnaround.
“The capital investment environment remains very challenging due to high interest rates and uncertainty about the economy,” Simons wrote in a note to clients on Wednesday. “The feigned hope of impending rate cuts poses some upside risk for the sector going forward, but recovery is still a long way off.”
However, the report contained some bright spots, including a decline in prices paid, which economists say bodes well for the fight against inflation.
“The data show no clear signs of a change in the ongoing trend of disinflation in goods,” Simons wrote.
- Wed, Jan 3, 2024 at 3:52 p.m. GMT
Oil prices rise 3% on supply concerns
Oil futures rose more than 3% on Wednesday on supply concerns following reports of a disruption at a major Libyan oil field.
West Texas Intermediate (CL=F) traded as high as $72.75 a barrel mid-morning. Brent (BZ=F) hit a session high of $78.29.
Futures have been volatile in recent sessions amid concerns about rising tensions in the Red Sea, which is linked to the Suez Canal, a key transportation route.
On Tuesday, oil prices fluctuated between positive and negative values after Iran sent a warship into the Red Sea.
“The real threat to prices is Iran’s oil exports (nearly 2 million barrels per day), which could suddenly be withdrawn from the global market,” Dennis Kissler, senior vice president at BOK Financial, wrote in a note to clients on Wednesday.
- Wed, Jan 3, 2024 at 3:19 p.m. GMT
Job vacancies reached their lowest level since March 2021
Job vacancies in November reached their lowest level since March 2021, below Wall Street expectations and reflecting a continued slowdown in the labor market through the end of 2023.
There were 8.79 million job openings at the end of November, a slight decline from the 8.85 million job openings in October, according to new Bureau of Labor Statistics data released Wednesday. Economists surveyed by Bloomberg had expected 8.82 million job vacancies.
The report also showed that the churn rate, a sign of worker confidence, fell to 2.2% from 2.3% the previous month. Additionally, the JOLTS report showed that 5.5 million new hires were made this month, down slightly from last month's 5.9 million.
- Wed, Jan 3, 2024 at 2:38 p.m. GMT
Technically lagging behind at the opening
Bond yields rose as technology stocks fell at the open on Wednesday, extending a trend seen the previous day.
The Dow Jones Industrial Average (^DJI) fell 0.3%, while the benchmark S&P 500 (^GSPC) fell about 0.5%. The Nasdaq Composite (^IXIC) fell about 0.7% after a heavy session in which technology stocks lost nearly 1.6%.
Meanwhile, bonds fell for a fourth day, sending the 10-year Treasury yield (^TNX) up nearly 4%.
The moves come after Tuesday gave the Nasdaq one of its worst starts to the year since 1972.
- Wed, Jan 3, 2024 at 11:28am GMT
The job market is coming into focus
After a difficult first day of trading, investors' attention will turn to the labor market on Wednesday. The monthly update on job vacancies and sales – known as the JOLTS report – is scheduled to be released at 10:00 a.m. ET.
A decline in job vacancies over the course of 2023 served as an early indicator that the U.S. labor market is slowing, and Wednesday's data will serve as an important baseline for the December jobs report on Friday.
Wednesday's report is expected to show 8.85 million job openings at the end of November.
Wed, Jan 3, 2024 at 9:03 p.m. GMT
Wed, Jan 3, 2024 at 7:58 p.m. GMT
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