Stocks experienced a downturn on Wednesday as rising Treasury yields overshadowed a continued rally in Nvidia, a leader in artificial intelligence technology. The Dow Jones Industrial Average fell sharply, marking its first decline in three days. Despite Nvidia’s impressive climb, which reversed an early loss, broader market sentiment was weighed down by increasing yields on the 10-year Treasury note. This rise in yields, driven by weak demand at a recent Treasury auction, highlighted investor concerns about borrowing costs and their impact on stock valuations. Consequently, the S&P 500 and Nasdaq Composite also saw declines, underlining a day of widespread market weakness.

Key Takeaways:

  • Dow Jones Drops Over 400 Points Amid Yield Pressure: The Dow Jones Industrial Average fell 411.32 points, or 1.06%, to close at 38,441.54. This decline was primarily influenced by rising yields on the 10-year Treasury note, which reached over 4.6% following a weak Treasury auction.
  • S&P 500 Posts First Loss in Three Sessions: The S&P 500 dipped 0.74% to 5,266.95, marking its first negative session in the last three. All 11 sectors in the index retreated, with more than 440 stocks closing lower, emphasising the extent of market weakness.
  • Nasdaq Composite Slips Despite Nvidia’s Gains: The Nasdaq Composite slipped 0.58% to 16,920.58. Nvidia’s 0.8% increase helped mitigate losses, but the index still closed in the red, highlighting the limited impact of individual stock gains on overall market sentiment.
  • UnitedHealth Leads Decline in Dow Components: UnitedHealth fell more than 3%, leading the Dow’s losses after management commentary regarding its Medicaid business. Other healthcare stocks, including Molina Healthcare, Humana, and Elevance Health, also experienced declines.
  • 10-Year Treasury Yield Rises: The yield on the 10-year Treasury note increased for the second consecutive day, trading above 4.6%. This rise followed a poorly received Treasury Department auction, where the bid-to-cover ratio fell below the 10-auction average, indicating weak demand.
  • European Markets Close Lower Across the Board: The Stoxx 600 dropped over 1%, with all sectors and major bourses in negative territory. Notably, mining stocks led the losses, down 2.12%, while the FTSE 100 and CAC 40 declined by 0.86% and 1.47%, respectively.
  • Asian Markets Mostly Lower Amid Inflation Concerns: In Asia, the Nikkei 225 fell 0.77% to 38,556.87, and the Kospi dropped 1.67% to 2,677.3. Meanwhile, Hong Kong’s Hang Seng index led regional losses, down 1.67%, as investors reacted to Australia’s higher-than-expected inflation data.
  • Oil Prices Ease Amid Demand Concerns: Brent futures fell 0.74% to $83.60 a barrel, while U.S. West Texas Intermediate crude dropped 0.75% to $79.23 a barrel. Worries over weak U.S. gasoline demand and economic data suggesting prolonged high interest rates contributed to the decline.

FX Today:

  • GBP/USD Slumps to Weekly Lows: GBP/USD fell 0.48%, dropping to fresh weekly lows at 1.2700. If the pair dips below 1.2680, it could test support at the May 3 daily high of 1.2634. Further support levels are noted at the 50-day SMA of 1.2580 and the 200-DMA of 1.2539. On the upside, reclaiming the current week’s high of 1.2777 could push the pair towards the year-to-date high of 1.2893.
  • USD/CAD Rebounds as Dollar Strengthens: USD/CAD traded 0.5% lower at 1.3715 after ranging between 1.3642 and 1.3717. The pair is experiencing near-term bullish momentum, climbing nearly 0.7% from the last swing low below 1.3620. Daily candles show a technical rebound from the 50-day Exponential Moving Average (EMA) at 1.3674, though long-term upside potential remains capped below 1.3740.
  • USD/JPY Advances Steadily: The USD/JPY pair rose to 157.70, driven by the Federal Reserve’s commitment to maintaining higher interest rates. The pair could challenge the next resistance at 158.00, with further gains targeting the April 26 high of 158.44 and the year-to-date high of 160.32. Support levels are identified at 157.00, followed by 156.48 and 156.25, in case of a downward correction.
  • Gold Price Drops Below Key Support Levels: Gold prices declined below $2,340, with the first support at the 50-day SMA of $2,321. A breach of this level could expose the May 8 low of $2,303, followed by the May 3 cycle low of $2,277. Conversely, reclaiming the $2,350 mark could lead to gains towards the year-to-date high of $2,450 and potentially $2,500.

Market Movers:

  • Abercrombie & Fitch Soars on Strong Q1 Sales: Shares of Abercrombie & Fitch surged 23.4% after the retailer reported fiscal first-quarter sales growth of 22% year-over-year. The company’s profit during this period was nearly 7 times higher compared to the previous year, exceeding Wall Street’s estimates and highlighting significant operational improvements.
  • Salesforce Plummets on Revenue Miss: Salesforce shares dropped 17% in extended trading following a weaker-than-expected revenue report. The cloud software vendor posted earnings of $2.44 per share, slightly above the expected $2.38 per share, but missed revenue expectations with $9.13 billion compared to the anticipated $9.17 billion.
  • Netflix Gains on Positive Analyst Outlook: Netflix saw its shares rise 1.3% after Morgan Stanley reiterated its overweight rating on the stock. The firm cited potential for strong double-digit revenue growth, driven by the streaming giant’s paid-sharing initiative, bolstering investor confidence in Netflix’s future performance.
  • American Airlines Sinks on Guidance Cut: American Airlines shares fell 13.5% after the company revised its second-quarter guidance downward. The travel stock now anticipates unit revenues to decline by as much as 6%, compared to previous guidance which projected a fall of no more than 3%. Adjusted earnings per share projections were also lowered.
  • Dick’s Sporting Goods Rallies on Earnings Beat: Shares of Dick’s Sporting Goods jumped 15.8% following a strong fiscal first-quarter earnings and revenue report. The sports equipment retailer raised its full-year earnings guidance to between $13.35 and $13.75 per share, up from the previous range of $12.85 to $13.25, surpassing analyst expectations of $13.25 per share.
  • ConocoPhillips Falls Amid Acquisition News: ConocoPhillips shares slipped 3.3% in midday trading after announcing a $17 billion all-stock deal to acquire Marathon Oil. Marathon’s shares, conversely, surged nearly 8.5% on the news, reflecting positive market reception of the acquisition.
  • HubSpot Gains on Acquisition Talks: HubSpot added 1.1% to its stock value following reports of an all-stock acquisition offer from Google parent Alphabet. This news builds on previous gains and underscores investor optimism about HubSpot’s future growth under Alphabet’s ownership.
  • Chewy Jumps on Earnings Beat: Chewy’s stock surged 26.9% after the pet supply retailer reported a significant quarterly earnings beat. The company posted earnings per share of 15 cents on $2.88 billion in revenue, outperforming expectations of 6 cents per share on $2.85 billion in revenue.
  • UnitedHealth Leads Decline in Healthcare Stocks: UnitedHealth shares dropped 3.8% following management commentary on its Medicaid business. Other healthcare stocks tied to federal health insurance programs, including Molina Healthcare, Humana, and Elevance Health, also saw declines, reflecting investor concerns about the sector’s outlook.

As the trading day unfolds, the declines in major indexes like the Dow Jones and S&P 500 underscore the market’s sensitivity to rising Treasury yields and shifting investor sentiment. Despite the upward momentum in Nvidia and select stocks, broader market concerns about borrowing costs and economic stability weighed heavily on performance. European and Asian markets mirrored this cautious sentiment, with notable declines driven by inflation data and sector-specific news. The mixed reactions among key stocks, such as Abercrombie & Fitch’s impressive gains contrasted with Salesforce’s revenue miss, highlight the varied landscape investors must navigate. Overall, the market remains on edge, balancing optimism from earnings beats against economic uncertainties and rising yields.