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

Stocks moved sharply lower over the course of the trading day on Wednesday, adding to the modest losses posted in the previous session. The major averages all posted steep losses, with the Nasdaq and the S&P 500 pulling back further off Monday’s record closing highs.

The major averages climbed off their worst levels going into the close but remained firmly negative. The Dow tumbled 633.87 points or 2.1 percent to 30,303.17, the Nasdaq plunged 355.47 points or 2.6 percent to 13,270.60 and the S&P 500 slumped 98.85 points or 2.6 percent to 3,750.77.

The sell-off on Wall Street came as traders finally seemed 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 were 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 skyrocketed on the day, leading to concerns hedge funds may need to sell other securities to offset their mounting losses.

Stocks saw further downside in late-day trading following the Federal Reserve’s first monetary policy announcement of the New Year.

The Fed left interest rates unchanged as widely expected and revealed it plans to maintain its asset purchase program at the current pace.

Trades may have been disappointed the central bank did not provide additional clarity about the outlook for its bond purchases.

The Fed’s statement reiterated the assertion first made last month, when the Fed said it will maintain asset purchases at the current rate until “substantial further progress” has been made toward its goals of maximum employment and price stability.

On the earnings front, shares of Boeing (BA) came under pressure after the aerospace giant reported a steep fourth quarter loss and further delayed its new 777x jet.

Coffee giant Starbucks (SBUX) also fell sharply 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) closed slightly higher 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.

Sector News

Semiconductor stocks turned in some of the market’s worst performances on the day, resulting in a 5.2 percent nosedive by the Philadelphia Semiconductor Index.

Chipmakers Advanced Micro Devices (AMD) and Texas Instruments (TXN) posted steep losses despite reporting better than expected quarterly results and providing upbeat guidance.

Substantial weakness was also visible among gold stocks, as reflected by the 4.4 percent slump by the NYSE Arca Gold Bugs Index. The index ended the session at its lowest closing level in seven months.

The sell-off by gold stocks came amid a continued decrease by the price of the precious metal, with gold for February delivery falling $6 to $1,844.90 an ounce.

Financial stocks also saw significant weakness on the day, dragging the KBW Bank Index and the NYSE Arca Broker/Dealer Index down by 3.5 percent and 3.2 percent, respectively.

Healthcare, retail and transportation stocks also showed notable moves to the downside, while computer hardware and networking stocks were among the few groups to buck the downtrend.

Other Markets

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 all moved sharply lower on the day. While the German DAX Index plunged by 1.8 percent, the U.K.’s FTSE 100 Index and the French CAC 40 Index tumbled by 1.3 percent and1.2 percent, respectively.

In the bond market, treasuries 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, fell by 2.6 basis points to 1.014 percent.

Looking Ahead

Reaction to the latest earnings news may impact trading on Thursday, with Apple (AAPL), Facebook (FB), and Tesla (TSLA) among the companies releasing their quarterly results after the close of today’s trading.

American Airlines (AAL), Comcast (CMCSA), JetBlue (JBLU), MasterCard (MA), McDonald’s (MCD), and Southwest Airlines (LUV) are also among the companies due to report their results before the start of trading on Thursday.

Traders are also likely to keep an eye on reports on initial jobless claims, new home sales and leading economic indicators.