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Nasdaq Pulls Back Sharply, Dow Finishes Choppy Day Slightly Lower

wallstreet aug31 16nov22 lt

Stocks moved mostly lower over the course of the trading session on Wednesday, largely offsetting the upward move seen on Tuesday. The tech-heavy Nasdaq showed a particularly steep drop, while the Dow spent much of the session lingering near the unchanged line.

After ending Tuesday's trading at a nearly two-month closing high, the Nasdaq tumbled 174.52 points or 1.5 percent to 11,183.66. The S&P 500 also slumped 32.94 points or 0.8 percent to 3,958.79.

Meanwhile, the narrower Dow edged down 39.09 points or 0.1 percent to 33,553.83, with strong gains by McDonald's (MCD) and UnitedHealth (UNH) helping limit the downside for the blue chip index.

The pullback by the broader markets came amid a steep drop by shares of Target (TGT), with the retail giant plunging by 13.1 percent.

Target came under pressure after reporting weaker than expected third quarter earnings and slashing its operating margin forecast for the current quarter.

Traders were also digesting a mixed batch of U.S. economic data, which added to recent uncertainty about the outlook for interest rates.

Before the start of trading, the Commerce Department released a report showing a significant increase in U.S. retail sales in the month of October.

The report showed retail sales surged by 1.3 percent in October after coming in unchanged in September. Economists had expected retail sales to jump by 1.0 percent.

Excluding a sharp increase in sales by motor vehicle and parts dealers, retail sales still shot up by 1.3 percent in October after inching up by 0.1 percent in September. Ex-auto sales were expected to rise by 0.4 percent.

Meanwhile, the Federal Reserve released a separate report unexpectedly showing a modest decrease in U.S. industrial production in the month of October.

The Fed said industrial production edged down by 0.1 percent in October following a revised 0.1 percent uptick in September.

The dip surprised economists, who had expected industrial production to inch up by 0.2 percent compared to the 0.4 percent increase originally reported for the previous month.

The National Association of Home Builders also released a report showing a continued decrease in U.S. homebuilder confidence in the month of November.

The report showed the NAHB/Wells Fargo Housing Market Index declined for the 11th consecutive month, slumping to 33 in November after tumbling to 38 in October. Economists had expected the index to dip to 36.

With the bigger than expected decrease, the index fell to its lowest reading since June 2012, with the exception of the onset of the pandemic in the spring of 2020.

Sector News

After turning in some of Tuesday's best performances, semiconductor stocks showed a substantial pullback on the day. The Philadelphia Semiconductor Index plummeted by 4.3 percent after ending the preceding session at its best closing level in well over two months.

Micron Technology (MU) posted a steep loss after the chipmaker said it is scaling back production in response to market conditions.

Computer hardware stocks also saw considerable weakness on the day, resulting in a 3.3 percent plunge by the NYSE Arca Computer Hardware Index.

Significant weakness was also visible among airline stocks, as reflected by the 3.9 percent nosedive by the NYSE Arca Airline Index.

Energy, brokerage and networking stocks also showed notable moves to the downside, while utilities stocks were among the few groups to buck the downtrend.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region moved mostly lower during trading on Wednesday. China's Shanghai Composite Index and Hong Kong's Hang Seng Index both fell by 0.5 percent, while Japan's Nikkei 225 Index bucked the downtrend and crept up by 0.1 percent.

The major European markets also moved to the downside on the day. While the German DAX Index slumped by 1.0 percent, the French CAC 40 Index slid by 0.5 percent and the U.K.'s FTSE 100 Index dipped by 0.3 percent.

In the bond market, treasuries moved sharply higher, extending the upward move seen in the previous session. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, tumbled by 10.7 basis points to 3.692 percent.

Looking Ahead

Economic data may continue to attract attention on Thursday, with traders likely to keep an eye on reports on weekly jobless claims, housing starts and Philadelphia-area manufacturing activity.

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