All three indexes gave up big gains to turn negative in final hour of trading
U.S. stock indexes gave up an early session rebound and turned negative in the final hour of trading Thursday, repeating Wednesday’s volatile pattern and pushing the tech-heavy Nasdaq Composite further into correction territory this week.
What happened?
- The Dow Jones Industrial Average DJIA, -0.89% closed down 313.26 points, or 0.9% at 34,715.39.
- The S&P 500 SPX, -1.10% fell 50.03 points, or 1.1%, to 4,482.73.
- The Nasdaq Composite COMP, -1.30% fell 186.23 points, or 1.3%, to 14,154.02. At one point, the index was up 2.1%, making Thursday’s whipsaw the Nasdaq’s largest same-day reversal since April 7, 2020.
Stocks fell Wednesday, with the Dow and S&P 500 each dropping around 1%, while the Nasdaq Composite shed 1.2%, leaving it down more than 10% from its record close in November and meeting the definition of a market correction.
What drove markets
Investors might want to get up and stretch, because Thursday probably gave them a nasty case of stock market whiplash.
All three major indexes looked to bounce back on Thursday morning, with the Dow gaining more than 380 points before noon, but a late day reversal saw stocks fall off the table as investors revealed some very deep unease and stopped “buying the dip” to “sell the rally.”
“That was pretty wild,” said Edward Moya, senior market analyst at Oanda. “We definitely faded those gains. The growth story in equities will be dragged out but we seem to be done with the pandemic story of buying every dip and not looking back.”
Stocks have struggled since the beginning of the year as bonds have sold off. The yield on the benchmark 10-year Treasury TMUBMUSD10Y, 1.778% has surged more than 30 basis points this year, hitting a two-year high earlier this week, while the 10-year German TMBMKDE-10Y, -0.060% bund yield turned positive for the first time in three years on Wednesday.
The rise in yields was seen taking a bigger toll on growth stocks, which are heavily represented in the Nasdaq Composite. Growth stock valuations are based on expectations for cash flow far into the future. When Treasury yields rise, the value of that future cash is discounted. Yields pulled back Wednesday and the 10-year rate was up 0.7 basis point at 1.834% Thursday.
On Thursday, investors continue to wade through corporate results, including airlines, as earnings season picks up steam.
In U.S. economic data Thursday, first-time jobless claims unexpectedly rose by 55,000 last week to 286,000, compared with expectations for 225,000, likely reflecting the effect of the spread of the omicron variant of the coronavirus that causes COVID-19.
The Philadelphia Fed’s manufacturing index rose to 23.2 in January from 15.4 in December.
Meanwhile, existing-home sales decreased 4.6% between November and December, hitting a seasonally-adjusted, annual rate of 6.18 million, the National Association of Realtors said Thursday. Compared with a year ago, sales were down more than 7%.
Markets also are paying attention to geopolitical worries, with Russia stationing troops along the border of Ukraine. “My guess is he will move in. He has to do something,” said U.S. President Joe Biden of Russian President Vladimir Putin at a press conference on Wednesday.
“All these geopolitical jitters are keeping investors nervous,” said Moya. “They just feel very real and there doesn’t seem to be good news coming on inflation.”
Separately, the People’s Bank of China cut a key interest rate, as the Hang Seng HSI, +0.05% surged more than 3%.
Which companies were in focus?
- United Airlines Holdings Inc. UAL, -3.42% late Wednesday reported a smaller-than-expected quarterly loss and sales came in above Wall Street expectations, but said it was postponing capacity increases until later in the year due to omicron and that it now believes this year’s capacity will be lower than in 2019. Shares fell 3.4%.
- Shares of American Airlines Group Inc. AAL, -3.18% fell 3.2% after reporting a narrower-than-expected loss and better-than-expected revenue.
- Shares of Travelers Cos. Inc. TRV, +3.19% gained 3.1% after the insurer reported a big profit beat.
- Casper Sleep Inc. CSPR, +9.77% said shareholders approved its plan to be acquired by certain subsidiaries of Durational Consumer SPV IV, an investment vehicle managed by Durational Capital Management LP. Shares jumped 10%.
- Shares in GameStop Corp. GME, -3.66% closed down 3.6% on the one-year anniversary of the short squeeze that gave birth to the so-called meme-stock movement.
What did other assets do?
- The ICE U.S. Dollar Index DXY, -0.17%, a measure of the currency against a basket of six major rivals, was up 0.4%.
- Oil futures CL.1, -2.49% fell 6 cents, or nearly 0.1%, to end at $86.90 a barrel on the New York Mercantile Exchange. Gold futures GC00, -0.17% fell 60 cents, or less than 0.1%, to settle at $1,842.60 an ounce.
- The Stoxx Europe 600 SXXP, -1.88% rose 0.4%, while London’s FTSE 100 UKX, -1.23% fell 0.2%.
- The Shanghai Composite SHCOMP, -0.91% fell 0.1%, while Japan’s Nikkei 225 NIK, -0.90% rose 1.1%.