Wall Street falls more than 1%; yields rise, investors assess earnings

Traders work on the floor of the New York Stock Exchange (NYSE) in New York City, U.S., Sept 26, 2023. REUTERS/Brendan McDermid/File photo

NEW YORK  – U.S. stocks ended sharply lower on Wednesday, with the S&P 500 and Nasdaq falling more than 1 percent each, as Treasury yields rose again and investors assessed the latest batch of quarterly corporate results and forecasts.

Mounting tensions in the Middle East stoked risk aversion. Safe-haven gold hit its highest level in more than two months. The Cboe Volatility index, Wall Street’s fear gauge, jumped.

Yields edged higher after data showing U.S. single-family homebuilding rebounded in September, supporting 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 from risk-free U.S. Treasuries dull the appeal of stocks.

On the earnings front, Procter & Gamble shares gained 2.6 percent after its quarterly sales topped market expectations, while United Airlines Holdings shares plunged 9.7 percent after the company forecast weaker fourth-quarter profit due to higher costs. The S&P 500 passenger airlines index dropped 5.6 percent.

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

Investors have been worried about repercussions from the Israel-Hamas conflict that began Oct. 7 with a Hamas attack on Israeli civilians and soldiers. U.S. President Joe Biden, during a lightning visit on Wednesday, pledged solidarity with Israel and said a deadly blast at a Gaza hospital seemed to have been caused by a rocket misfired by militants.

Also in earnings news, Morgan Stanley’s third-quarter profit showed a hit from lethargic dealmaking. Shares ended the day down 6.8 percent.

After the closing bell, shares of Tesla were up about 2 percent and Netflix jumped about 12 percent after the companies reported quarterly results. Tesla ended the regular session down 4.8 percent and Netflix ended the session down 2.7 percent.

More results are expected in the coming days as third-quarter U.S. earnings season kicks into high gear.

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.