U.S. Stocks Fall Sharply Amid Worries About Speculative Trading

After ending the previous session modestly lower, stocks have shown a substantial move to the downside in morning trading on Wednesday. The Nasdaq and the S&P 500 are pulling back further off Monday’s record closing highs.

The major averages have climbed off their worst levels of the day but currently remain firmly negative. The Dow is down 381.72 points or 1.2 percent at 30,555.32, the Nasdaq is down 134.54 points or 1 percent at 13,491.53 and the S&P 500 is down 49.47 points or 1.3 percent at 3,800.15.

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 jumped 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.

Gold stocks are turning in some of the market’s worst performances in morning trading, dragging the NYSE Arca Gold Bugs Index down by 3 percent. The index has fallen to its lowest level in seven months.

The sell-off by gold stocks comes amid a decrease by the price of the precious metal, with gold for February delivery sliding $6.90 to $1,844 an ounce.

Substantial weakness is also visible among semiconductor stocks, as reflected by the 2.8 percent slump by the Philadelphia Semiconductor Index.

Chipmakers Advanced Micro Devices (AMD) and Texas Instruments (TXN) are seeing notable weakness despite reporting better than expected quarterly results and providing upbeat guidance.

Steel, chemical, and banking stocks have also shown significant moves to the downside on the day, reflecting broad based selling pressure.

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 have moved sharply lower on the day. While the German DAX Index has plunged by 1.8 percent, the French CAC 40 Index and the U.K.’s FTSE 100 Index are both down by 1.4 percent.

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 2 basis points at 1.020 percent.

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