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U.S. Stocks Remain Sharply Lower After Early Sell-Off

wallstreet aug22 27jan21 lt

After moving sharply lower early in the session, stocks continue to see substantial weakness in mid-day trading on Wednesday. The major averages are adding to yesterday's modest losses, with the Nasdaq and the S&P 500 pulling back further off Monday's record closing highs.

The major averages have moved to the downside in recent trading but remain off their worst levels of the day. The Dow is down 419.68 points or 1.4 percent at 30,517.36, the Nasdaq is down 234.31 points or 1.7 percent at 13,391.75 and the S&P 500 is down 71.35 points or 1.9 percent at 3,778.27.

The sell-off on Wall Street comes as traders finally seem to be paying attention to concerns about the impact of new, more contagious coronavirus strains along with uncertainty about the prospects for a new relief package.

Traders are also worried about recent speculative trading by retail investors amid continued spikes by heavily shorted stocks like GameStop (GME) and AMC Entertainment (AMC).

GameStop and AMC are skyrocketing on the day, leading to concerns hedge funds may need to sell other securities to offset their mounting losses.

The weakness on Wall Street may also reflect apprehension ahead of the Federal Reserve's monetary policy announcement this afternoon.

The Fed is widely expected to leave interest rates unchanged, but traders will be closely watching the central bank's comments about its bond purchasing program, hoping they avoid any mention of "tapering."

On the earnings front, shares of Boeing (BA) have come under pressure after the aerospace giant reported a steep fourth quarter loss and further delayed its new 777x jet.

Coffee giant Starbucks (SBUX) is also notably lower after reporting mixed fiscal first quarter results and forecasting weaker than expected fiscal second quarter earnings. Starbucks also announced the departure of Chief Operating Officer Rosalind Brewer.

Meanwhile, shares of Microsoft (MSFT) have risen after the software giant reported fiscal second quarter results that beat expectations on both the top and bottom lines.

In U.S. economic news, a report released by the Commerce Department showed new orders for manufactured durable goods rose by much less than expected in the month of December.

The Commerce Department said durable goods orders edged up by 0.2 percent in December after surging by an upwardly revised 1.2 percent in November.

Economists had expected durable goods orders to increase by 0.9 percent compared to the 1.0 percent jump that had been reported for the previous month.

Excluding a pullback in orders for transportation equipment, durable goods orders climbed by 0.7 percent in December after advancing by 0.8 percent in November. Ex-transportation orders were expected to rise by 0.5 percent.

Sector News

Semiconductor stocks continue to see substantial weakness in mid-day trading, with the Philadelphia Semiconductor Index plunging by 3.7 percent.

Chipmakers Advanced Micro Devices (AMD) and Texas Instruments (TXN) are posting steep losses despite reporting better than expected quarterly results and providing upbeat guidance.

Significant weakness has also emerged among banking stocks, as reflected by the 2.8 percent nosedive by the KBW Bank Index.

Healthcare stocks are also seeing considerable weakness on the day, resulting in a 2.4 percent slump by the Dow Jones U.S. Health Care Index.

Gold, chemical and steel stocks are also seeing notable weakness, while oil service, computer hardware and networking stocks are bucking the downtrend.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region turned in a mixed performance during trading on Wednesday. Japan's Nikkei 225 Index rose by 0.3 percent, while Hong Kong's Hang Seng Index fell by 0.3 percent.

Meanwhile, the major European markets all moved sharply lower on the day. While the German DAX Index plunged by 1.8 percent, the U.K.'s FTSE 100 Index and the French CAC 40 Index tumbled by 1.3 percent and1.2 percent, respectively.

In the bond market, treasuries have moved to the upside after ending the previous session nearly flat. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, is down by 3.1 basis points at 1.009 percent.

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