The Nasdaq and S&P 500 drifted lower again on Wednesday, adding to weakness seen the previous day. The Dow spent much of the day in the red but pushed above the flat line just before the close.
The Nasdaq Composite (COMP.IND) closed -0.7%, the S&P 500 (SP500) finished -0.5% and the Dow (DJI) ended with a fractional gain.
Although it showed weakness into the closing minutes of trading, the Dow Jones ended higher by 5.14 points to finish at 32,661.84. Meanwhile, the S&P 500 slipped 18.76 points to 3,951.39 and the Nasdaq retreated 76.06 points to conclude trading at 11,379.48.
Eight of the 11 S&P sectors recorded losses. This included greater-than-1% declines for Consumer Discretionary, Real Estate and Utilities. Energy was the standout to the upside, climbing 1.9%. Materials and Industrials posted modest gains.
Concerns about the Federal Reserve once gain weighed on the equity market. This time around, these worries were stirred by another round of economic data and hawkish comments from central bank officials.
“After a rough February, the hopes that March would start off favorable for market bulls were dashed, with both the S&P 500 and Nasdaq declining for the day,” analyst Daniel Jones told Seeking Alpha. “Although earnings for most companies for their most recent quarters were positive, and China reported official manufacturing PMI data that was at its highest in over a decade, markets seemed to be skittish because of comments by two different Federal Reserve Bank members.”
“The continued pessimism centers around the idea that the economy is still too strong and that, as a result, we may need to see additional interest rate hikes that, in turn, reduce the chance of a soft landing,” he added. “But at the end of the day, the important thing is focusing on companies that will offer long-term potential, even if that means that they might experience near-term volatility from uncertain economic conditions.”
Looking at the latest comments from policymakers, Atlanta Fed President Raphael Bostic advocated for rates to rise above 5%. As part of an online essay, he added that the key rate would have to be held there until “well into 2024.”
Elsewhere, Minneapolis Fed President Neel Kashkari expressed concerned about incoming economic data and said he was open to either a 25-basis-point or a 50-basis-point rate hike at the Fed’s March meeting.
As to the day’s key economic statistics, the ISM’s gauge of manufacturing activity rose to 47.7 for February. This was the first increase in six months, although the figure remained in contraction territory.
Fixed-income trading was marked by selling, sending yields higher. The 10-year Treasury yield (US10Y) advanced 9 basis points to 4.00%, while the 2-year yield (US2Y) climbed 9 basis points to 4.89%.
Among active stocks, Novavax (NVAX) plunged in the wake of its quarterly report, with the vaccine maker missing expectations on both its top and bottom lines.