The Dow Jones Industrial Average fell on Wednesday as investors awaited an update from the Federal Reserve on the state of the economy and status of any further stimulus from the central bank.
The 30-stock Dow dropped 145 points, or 0.5%, as Boeing shares slid more than 5%.The S&P 500 dipped 0.17%. The Nasdaq Composite rose 0.6% and hit a fresh record high as gains in major tech stocks limited the broader market’s decline.
Shares of Amazon and Apple gained more than 2% each and hit all-time highs. Alphabet and Netflix rose 0.6% and 0.2%, respectively. Stocks that would benefit from the economy reopening — which have outperformed in recent weeks — fell broadly. American Airlines, United and JetBlue all dropped more than 6%. Wells Fargo slid about 6% while Citigroup lost 3.7%. JPMorgan Chase traded about 2% lower.
“A large shift is occurring as investors cycle out of value/cyclical stocks for a second day and pour money into growth,” said Adam Crisafulli of Vital Knowledge, in a note. “Keep in mind: investors never left growth/momentum. There was a brief flirtation w/cyclical-value over the last couple of weeks, but this was just rental positions held by tourists (growth is still home base for the majority of people in this market).”
Wednesday’s moves come as Texas reports consecutive record surges in coronavirus-related hospitalizations while Arizona’s hospitalization rate is also rising.
The Fed is expected to keep policy unchanged, but investors will be watching for thoughts on possibly implementing yield caps and strengthening forward guidance on how long the Fed will keep current policies in place. The Fed will be revealing its first forecast for the economy and interest rates since late last year, as it skipped a forecast in March just as the pandemic forced the abrupt shutdown of the economy.
“I don’t think the Fed is going to back off at all here,” said Gregory Faranello, head of U.S. rates trading at AmeriVet Securities. “This is a longer-term endeavor. We think rates are going to be hon hold here for a long period of time. And, when you look at some of their programs, they’re just getting these lending facilities up and running.”
The central bank’s announcement is set for release at 2 p.m. ET. Fed Chairman Jerome Powell is scheduled to answer questions at 2:30 p.m.
The Dow and S&P 500 were under pressure on Tuesday as stocks benefiting from the economic reopening fell broadly. The Dow fell 300 points or 1.1%, snapping a 6-day winning streak. The 30-stock average was dragged down by a 5.9% drop in Boeing. The S&P 500 lost 0.8% on Tuesday. The index briefly turned positive for the year on Monday.
“After such a ferocious run in recent weeks, the stock market was overdue for a correction or at least a pause,” Jim Paulsen, chief investment strategist at the Leuthold Group, told CNBC. “Upside price momentum was becoming extreme and sentiment indicators a bit too bullish. Profit-taking won over [Tuesday], particularly in those economically sensitive area which have done the best in recent weeks.”
“Being overweight stocks most sensitive to an economic revival worked well in recent weeks but not earlier in the year and not today,” added Paulsen. “Alternatively, owning high-growth, new-era stocks worked well earlier in the year and did very well today but not in the last couple weeks.”
—CNBC’s Jeff Cox contributed to this report.
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