The Dow Jones Industrial Average and the S&P 500 experienced a decline on Wednesday, retracting from their all-time highs recorded in the previous session, as traders meticulously assessed the latest economic indicators. The Dow fell by 0.7%, settling at 41,914.8, whereas the S&P 500 dipped slightly by 0.2%, closing at 5,722.3.
Meanwhile, the Nasdaq Composite showed minimal movement, remaining steady at 18,082.2. Among the sectors, energy faced the most significant drop, while consumer staples and communication services displayed negligible changes. Only utilities and technology sectors managed to close on a positive note. In terms of economic developments, new home sales in the United States saw a downturn in August, with government data revealing a sequential decline in median prices at the national level.
According to Oxford Economics, "Lower mortgage rates and more plentiful supply relative to existing homes should support modest growth in new home sales over the remainder of 2024 and into 2025." Furthermore, weekly mortgage applications in the US surged to their highest level since July 2022, attributed to a wave of refinancing activities as the 30-year fixed mortgage rate for conforming loan balances fell for the eighth consecutive week, as reported by the Mortgage Bankers Association. In the bond market, the US 10-year yield climbed by 5.3 basis points, reaching 3.79% on Wednesday, while the two-year rate increased by 4.1 basis points to 3.56%.
Last week, the Federal Reserve implemented a notable interest rate reduction of 50 basis points, contrasting with a Bloomberg-compiled consensus that suggested only a 25-basis-point cut. On Tuesday, the Conference Board disclosed that consumer confidence in the US plummeted at its sharpest rate in nearly three years, alongside a slight uptick in the annual inflation outlook.
"Market participants appear increasingly divided over the size of the Fed's forthcoming policy adjustment," noted Stifel in a client memorandum on Wednesday. "While the latest consumer confidence statistics have heightened expectations for a substantial (50-basis-point) cut in November, growing inflation expectations coupled with anticipated risks to the upcoming personal consumption expenditure report have others wagering on a smaller quarter-point reduction, or possibly even a pause." In the commodities sector, West Texas Intermediate crude oil price declined by 2.5%, now priced at $69.75 per barrel.
Reports from the Energy Information Administration showed that commercial crude inventory in the US decreased by 4.5 million barrels, ending the week at 413 million barrels, surpassing the consensus prediction of a 1.4 million barrel decrease. Shifting focus to corporate news, General Motors saw a 4.9% loss in its shares, while Ford Motor Company dropped by 4.1%, marking some of the largest declines on the S&P 500, following downgrades issued by Morgan Stanley.
Amgen experienced the most considerable drop within the Dow and the Nasdaq, being the second worst performer on the S&P 500 with a 5.5% fall. In operational adjustments, Southwest Airlines is reported to cut back its Atlanta flights from 567 to 381 weekly flights. As a result, the airline's shares fell by 4.6%, contributing to the notable losses on the S&P 500.
Conversely, Hewlett Packard Enterprise emerged as the second-best gainer on the S&P 500, with a 5.1% increase, driven by Barclays' upgrade of the firm to overweight from equal-weight, and a revised price target set at $24, up from $20. In the precious metals market, gold saw a slight increase of 0.3%, reaching $2,684.20 per troy ounce, while silver experienced a small decline, falling 0.9% to $32.15 per ounce..