S&P 500 drops record but remains on track for best month since 2020

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Top line

The stock market retreated from record highs and fell on Wednesday as the third-quarter earnings-driven rally began to falter, although the S&P 500 remains on track for its best month since November 2020.

Highlights

The Dow Jones Industrial Average and S&P 500 were down 0.7% and 0.5%, respectively, on Wednesday, while the tech-rich Nasdaq Composite was flat.

The Dow Jones and the S&P 500 both fell for the first time in at least three days, despite a recent earnings-driven rally that propelled the market to new highs.

The S&P 500 remains on track for its best month since November 2020, up more than 5% so far in October, while the Dow Jones is up around 4%.

Third quarter earnings have so far proved more resilient than expected, despite concerns over inflationary pressures, supply chain disruptions and labor shortages: just over a third of S&P 500 companies have released results so far, 83% of which are above estimates, according to Réfinitif.

Big tech stocks like Microsoft and Alphabet, parent company of Google, rose more than 4% after the two companies beat earnings estimates on Tuesday, while shares of Visa fell nearly 7% after releasing cautious income outlook.

Shares of popular stock trading app Robinhood, meanwhile, fell more than 10% on Wednesday after reporting profits well below expectations due to a sharp drop in crypto trading.

Crucial quote:

Today was in fact “one of the most tumultuous, brutal and frustrating sessions in a long time” as most sectors suffered losses, with the biggest drops coming from financials and energy stocks, said Adam Crisafulli, founder of Vital Knowledge. “The overall market was very soft in the United States, although this was somewhat masked by huge post-profit rallies at Google and Microsoft.” The market sank late in the session, he said, after Democrats suffered another setback in their efforts to reach agreement on the government’s spending bill.

Tangent:

As Democrats continue to work out the details of their massive social spending plan – and how to pay it, a new billionaire wealth tax was immediately removed on Wednesday. Moderate Sen. Joe Manchin (TBEN.V.), whose support is crucial for Democrats to pass legislation in the equally divided Senate, has raised concerns, effectively killing the proposal just hours after it was released.

To monitor :

“The Nasdaq continues to outperform after strong mega-cap tech results and as Democrats struggle to find ways to raise taxes, Big Tech Kryptonite has consistently raised taxes and regulation,” Edward said. Maya, Oanda Senior Market Analyst. “With Senator Joe Manchin showing little openness to tax increases, tech stocks are skyrocketing.”

Further reading:

Robinhood shares dip after falling crypto trading profits (TBEN)

Twitter shares surge after Apple’s privacy changes have minimal impact on quarterly earnings (TBEN)

A tax billionaire died on arrival after Manchin blew up his proposal just hours after it was published (TBEN)

Shares close at record highs after Tesla hit $ 1,000 billion in market value (TBEN)

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