Wall Street’s main indexes slid on Wednesday, with the Dow plunging more than 600 points, as worries of a less dovish Federal Reserve lifted Treasury yields, pressuring megacap stocks and amplifying losses in McDonald’s and Coca-Cola shares.
In afternoon trading The Dow Jones Industrial Average tumbled 566 points, or 1.3%, to 42,358. The S&P 500 lost 1.5%, and the Nasdaq dropped more than 2%.
The benchmark index is set to log its third consecutive day of decline, if losses hold.
McDonald’s slumped 4.7% after an E. coli infection linked to its Quarter Pounder hamburgers killed one and sickened many.
Coca-Cola dipped 2.3% after the company reiterated its annual profit growth forecast despite expecting higher revenue.
Benchmark 10-year US Treasury yields were at three-month highs, putting stocks under pressure. Markets are reassessing the size of interest-rate cuts over the next several months against the backdrop of strong economic data and the upcoming presidential election.
Rate-sensitive megacaps took a hit, with Nvidia down 2.2% and Apple off 2%, pulling Information Technology stocks 1% lower and dragging on the tech-laden Nasdaq.
“The move higher in yields has actually been going on ever since the (Federal Reserve) meeting. It’s just in the past week or so that the market has woken up to it,” said Michael O’Rourke, chief market strategist at JonesTrading, adding that the 10-year yield is likely to stabilize around the 4.2% level.
“You also have to balance the fact that the US equity market is expensive on a valuation basis, so we could (be) due for profit-taking.”
Tesla, the first of the so-called Magnificent Seven companies scheduled to report results after market close, lost 1%.
US markets are near record-high levels, but a combination of earnings, a changing monetary policy outlook and the upcoming presidential election will test the sustainability of the recent rally and could trigger some market volatility, analysts said.
The Fed’s Beige Book is on the radar later in the day.
Richmond Federal Reserve President Thomas Barkin said the central bank’s fight to return inflation to its 2% target may take longer than expected to achieve, limiting how far interest rates can be cut.
Boeing dropped 2.3% after reporting a quarterly loss of $6 billion owing to a crippling strike.
Factory workers at the troubled planemaker will vote later in the day on a new contract proposal that could end the more than five-week-long standoff.
Meanwhile, Starbucks pared steep premarket losses to drop 0.5% after suspending its annual forecast on Tuesday.
Semiconductor company Texas Instruments gained 3.5% after its third-quarter profit beat forecasts, while AT&T rose 3.8% after gaining more wireless subscribers than expected in the third quarter.