U.S. stock indexes fell on Wednesday, as investors locked in profits after a strong 2023 and awaited the Federal Reserve's December meeting minutes that could offer hints on its interest rate path.
Wall Street kicked off the new year on a downbeat note on Tuesday, as Apple and high-growth companies came under pressure from higher yields, halting a blistering rally in stock markets.
Last week, the benchmark S&P 500 (.SPX) came within striking distance of its all-time closing high as investors priced in aggressive rate cuts this year following signs of cooling inflation.
Shares of rate-sensitive megacap stocks extended their drop on Wednesday, with Nvidia (NVDA.O), Apple (AAPL.O) and Tesla (TSLA.O) down between 0.6% and 3.8%, as the 10-year Treasury yield climbed for a fourth straight session to 3.968%.
"The decline yesterday, today and maybe for the next couple of weeks, is a result of people locking in profits and reconsidering what the narrative is - are rates really going down five or six times as it appeared to be the narrative at the end of last year?" said Ken Polcari, managing partner at Kace Capital Advisors.
While the Fed is widely expected to keep rates on hold in January, traders have priced in a 65.7% chance of a 25 basis point rate cut in March, as per CMEGroup's FedWatch tool.
"The minutes are going to show that they've been talking about potentially starting to cut rates, but not at the rate at which the market is expecting," added Polcari.
The U.S. central bank is "making real progress" towards taming inflation and a soft landing seeming "increasingly conceivable," said Richmond Fed President Thomas Barkin, a voting member in the FOMC's rate-setting committee this year.
The Labor Department's survey that showed job openings dropped to 8.790 million in November from a revised 8.852 million in the previous month, indicating weakness in the labor market, helped limit losses on Wall street on Wednesday.
Another report showed a gauge of U.S. manufacturing activity stood at 47.4 in December, above the estimate of 47.1, according to economists polled by Reuters.
At 10:08 a.m. ET, the Dow Jones Industrial Average (.DJI) was down 164.45 points, or 0.44%, at 37,550.59, the S&P 500 (.SPX) was down 22.00 points, or 0.46%, at 4,720.83, and the Nasdaq Composite (.IXIC) was down 91.78 points, or 0.62%, at 14,674.16.
Nine of 11 S&P 500 sectors traded in the red, with materials (.SPLRCM) and real-estate (.SPLRCR) leading declines.
Verizon Communications (VZ.N) rose 1.7% after KeyBanc upgraded the stock to "overweight".
Charles Schwab (SCHW.N) and Blackstone (BX.N) dropped 2.8% and 3.8%, respectively, after Goldman Sachs downgraded the stocks to "neutral" from "buy".
Declining issues outnumbered advancers for a 2.98-to-1 ratio on the NYSE and a 2.70-to-1 ratio on the Nasdaq.
The S&P index recorded 15 new 52-week highs and no new lows, while the Nasdaq recorded 27 new highs and 33 new lows.
