Wall Street tumbles to sharply lower close as abrupt sell-off snaps
rally
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[December 21, 2023] By
Stephen Culp
NEW YORK (Reuters) - U.S. stocks closed lower on Wednesday after an
abrupt mid-afternoon nosedive ended Wall Street's impressive rally,
which had been driven by falling interest rates and the Federal
Reserve's dovish turn.
All three major U.S. stock indexes veered lower late in the session to
end 1.3% to 1.5% below Tuesday's close.
Stocks were "near all time highs, they hit resistance," said Jay
Hatfield, portfolio manager at InfraCap in New York, noting the downturn
was "surprisingly vociferous, things went from hot to cold real fast."
"It’s surprising how aggressive the sell-off is, but it makes sense
considering how far we’ve come," Hatfield added.
FedEx shares tumbled 12.1% after the package delivery company missed
quarterly profit estimates and cut its full-year revenue forecast as it
battles United Parcel Service in what is shaping up to be a weak holiday
season. UPS dropped 2.9%.
Some traders said the market selloff could have been aggravated by large
purchases of near-term put options on the S&P 500, including put
contracts that would guard against a drop below the 4,755 level on the
index by the end of the session.
Put options convey the right to sell shares at a fixed price in the
future and at times options-linked hedging activity can heighten
volatility.
In extended trade, Micron Technology jumped 4.4% after the memory
chipmaker forecast quarterly revenue above estimates.
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During the session, the S&P 500 got within 0.5% of its all-time closing
high. Reaching a new closing high would have confirmed the benchmark
index had been in a bull market since closing at the bear market floor
in October 2022.
The index is now more than 2.0% below its record closing high.
"We've had this aggressive rally in December and investor sentiment is
high, it went from bearish to bullish in almost record time," said
Thomas Martin, Senior Portfolio Manager at GLOBALT in Atlanta. "So the
markets are asking 'now what?'"
Last week, the Federal Reserve signaled it had reached the end of its
tightening cycle and opened the door to rate cuts in 2024.
Chicago Fed President Austan Goolsbee late Tuesday reiterated that the
rate at which inflation cools to the Fed's annual 2% target will drive
policy on rate reduction.
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A Christmas tree is seen outside of the New York Stock Exchange
(NYSE) in New York City, U.S., December 15, 2023. REUTERS/Brendan
McDermid/File Photo
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Financial markets were pricing in a 71.1% likelihood of that first
cut arriving as soon as March, according to CME's FedWatch tool.
On the economic front, bigger than expected jump in U.S. consumer
confidence and a surprise increase in existing home sales helped
turn the major indexes green.
The Commerce Department is expected to wrap up the week with its
third and final take on third-quarter GDP on Thursday, to be
followed on Friday by its wide-ranging Personal Consumption
Expenditures (PCE) report, which will cover income growth, consumer
spending and, crucially, inflation.
The Dow Jones Industrial Average fell 475.92 points, or 1.27%, to
37,082, the S&P 500 lost 70.02 points, or 1.47%, to 4,698.35 and the
Nasdaq Composite dropped 225.28 points, or 1.5%, to 14,777.94.
All 11 major sectors in the S&P 500 closed in the red, with consumer
staples suffering the steepest percentage decline after packaged
food company General Mills cut its sales forecast.
Alphabet gained 1.2% after the company announced it was
restructuring Google's ad sales unit.
Management consulting firm Aon tumbled 6.0% following its
announcement that it would buy privately held insurance broker NFP
in a $13.4 billion deal.
Declining issues outnumbered advancing ones on the NYSE by a
2.64-to-1 ratio; on Nasdaq, a 2.26-to-1 ratio favored decliners.
The S&P 500 posted 36 new 52-week highs and 1 new lows; the Nasdaq
Composite recorded 210 new highs and 89 new lows.
Volume on U.S. exchanges was 12.84 billion shares, compared with the
12.15 billion average for the full session over the last 20 trading
days.
(Reporting by Stephen Culp; Additional reporting by Saqib Ahmed in
New York, Johann M Cherian and Shristi Achar A in Bengaluru, and by
Noel Randewich in Oakland, Calif.; Editing by David Gregorio)
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