Major stock indices faced significant losses on Wednesday, with the Dow Industrials experiencing their largest yearly drop amid mounting inflation concerns and rising bond yields. Key economic data, including jobless claims, Real GDP, and the PCE Price Index, are due Thursday morning, alongside significant corporate earnings reports from tech giants like Amazon, Apple, and Coinbase. Investors are closely watching these events for potential market direction.
Market Movers: Inflation Fears, Rising Rates, and Key Earnings on Tap
Date: Thursday
Overview: Major stock indices experienced significant declines on Wednesday, driven by escalating inflation fears and rising bond yields. The Dow Industrials saw its steepest drop of the year, tumbling over 1,100 points. Investors are now bracing for a trading session filled with crucial economic data releases and significant corporate earnings reports.
Market Performance Recap
The Dow Industrials suffered a substantial setback, falling 2.19% and marking its deepest drop of the year. The index is now down 3.18% from its earlier monthly high. This decline was attributed by Jim Cramer to inflation anxieties and a surge in bond rates, particularly the 30-year Treasury yield breaching 5.2%, a level not seen since 2007.
- S&P 500: Lost 1.52%, down 4% from its June high.
- Nasdaq Composite: Fell 1.74%, now 10.1% below its June high.
- NYSE Composite: Decreased 1.2%, down 1.28% from Tuesday's all-time high.
- Russell 2000: Dropped 1.6%, off 4.6% from its July 1 high.
Sector Breakdown:
Industrials were the weakest sector, down 3.24% and 4.8% from their July 6 high. Conversely, Energy, Consumer Staples, and Communications Services closed in positive territory. Real Estate and Healthcare saw declines but had touched new highs earlier in the day.
Bond Market Watch
Jeffrey Gundlach, a prominent voice in the bond market, discussed the Federal Reserve's challenge in reaching its 2% inflation target without further rate hikes, suggesting it could take years. He also anticipates a weaker dollar.
- 30-year Treasury yield: 5.21%
- 10-year Treasury note: 4.69%
- 2-year Treasury: 4.26%
- 3-month Treasury bill: 3.78%
- 1-month T-bill: 3.65%
Bond ETF Yields:
- Fidelity Corporate Bond ETF (FCOR): 4.64%
- SPDR Bloomberg High Yield Bond ETF (JNK): 6.66%
- iShares iBoxx High Yield Corporate Bond ETF (HYG): 5.94%
- iShares 0-5 Year High Yield Corporate Bond ETF (SHYG): 7.04%
Key Economic Data on Deck
Investors will be closely watching several critical economic releases scheduled for Thursday morning:
- Jobless Claims: Expected at 8:30 a.m. ET. The Dow Jones consensus estimate is 200,000, with prediction markets leaning towards a higher number.
- Real GDP: Also due at 8:30 a.m. ET, with a consensus estimate of a 1.8% rise.
- Personal Consumption Expenditures (PCE) Price Index: This key inflation gauge will be released at 8:30 a.m. ET. Dow Jones consensus expects a 0.1% month-to-month decline, with a 0.2% increase for the core estimate. Year-over-year, the consensus is 3.7% (3.3% for core).
Earnings Previews
Several major companies are set to report earnings, providing potential catalysts for market movement:
Hershey (HSY):
Quarterly report expected at 7 a.m. ET. The stock has seen a nearly 3% decline in three months and is down 23% from its March high, despite cocoa prices rising 80% since March 1.
After the Bell Earnings:
- Amazon: Quarterly results due after market close. The stock is down approximately 14% in three months and 8% from its recent high. Implied volatility is 7%.
- Apple: Earnings report to follow. The stock has risen 25% in three months, hitting a new high today, and is up nearly 17% in July. Implied volatility stands at 3.5%.
- Coinbase: Earnings are also on the schedule. The stock is down nearly 12% in three months and 60% from its October high. Implied volatility is 8%.
Global Rate Decisions
International central banks will also be making key rate decisions:
- Bank of England: Decision expected at 7 a.m. ET.
- Bank of Japan: Announcement scheduled for 10 p.m. ET.
Relevant ETFs: iShares MSCI United Kingdom ETF (EWU) is trading near its February high, while iShares MSCI Japan ETF (EWJ) is down 8.4% from its June high.
Company-Specific Movers
Robinhood (HOOD):
The online brokerage reported strong earnings, driven by its expansion into prediction markets, options trading, and trading around the SpaceX IPO. Transaction-based revenue surged 44%, fueled by higher trading volumes. CFO Shiv Verma stated the business is "firing on all cylinders." The stock is up about 40% since April but saw a 4% dip in after-hours trading. CEO Vlad Tenev is scheduled to appear on "Squawk Box" Thursday.
Other Notable Earnings Reactions:
- Meta Platforms: Fell 7% in extended trading after issuing weaker-than-expected guidance.
- Qualcomm: Dropped nearly 4% due to uninspiring forward guidance.
- Microsoft: Rose 8% after hours, boosted by strong results, particularly in its Azure cloud and AI services.
CNBC TV's producers and anchors will continue to track these developing stories throughout the day on programs like "Morning Call" and "Closing Bell.".
