NEW YORK: U.S. stock indexes fell on Wednesday as oil prices climbed and Adobe shares tumbled on a disappointing forecast, while investors assessed the outlook for U.S. interest rates following calls from Federal Reserve policymakers for bigger increases.
Ten of the 11 major S&P sectors were down, with financial and healthcare shares declining the most. Bank stocks fell 1.7%.
Adobe Inc slid 9.9% to weigh the most on the S&P 500 and the Nasdaq after the Photoshop maker forecast downbeat second-quarter revenue and profit and sees an impact on fiscal 2022 revenue due to the Russia-Ukraine crisis.
Still the tech-heavy Nasdaq fared better than its peers on a boost from shares of megacap Amazon.com, Apple Inc and Tesla Inc.
“What you got is a lot of investors trying to buy a dip in the market and going to the old favorites,” said Paul Nolte, portfolio manager at Kingsview Investment Management in Chicago.
“So you’ve got Amazon and Apple and some of the bigger names that have come down 15% or more, and investors are looking and saying earnings probably aren’t going to change too terribly much and the stocks are on sale.”
San Francisco Federal Reserve Bank President Mary Daly said on Wednesday she is open to raising rates by 50 basis points in May, joining other policymakers in saying so.
The hawkish pivot was in line with Chair Jerome Powell’s comments on Monday and came just a week after the U.S. central bank raised interest rates for the first time since 2018.
Traders see a 72.2% chance of a 50 basis point rate hike by the Fed in its May meeting.
“We had a pretty strong relief rally from the last week through the FOMC (the Federal Open Market Committee) meeting. Now, investors are potentially thinking about two things - how higher the rates are going to potentially go and what earnings prospects look like in the U.S.,” said Zachary Hill, head of portfolio management at Horizon Investments in Charlotte.
“There’s plenty of uncertainty still. Ukraine is an obvious one and the outlook for inflation through the commodity channel.”
Energy stocks, the best-performing S&P sector so far this year, resumed their march higher after taking a breather on Tuesday. Occidental Petroleum OXY.N led the gains, up 1.8%, as Brent crude climbed above $120 a barrel.
At 12:26 p.m. ET, the Dow Jones Industrial Average was down 290.47 points, or 0.83%, at 34,516.99, the S&P 500 was down 23.12 points, or 0.51%, at 4,488.49, and the Nasdaq Composite was down 9.66 points, or 0.07%, at 14,099.16.
Meanwhile, NATO will likely decide on Thursday to ramp up military forces on its eastern flank, the head of the alliance said, while also warning Russia against using nuclear weapons after its Feb. 24 invasion of Ukraine.
GameStop Corp, which was at the heart of the meme stocks rally last year, jumped 16.2% after Chairman Ryan Cohen’s investment company bought 100,000 shares of the videogame retailer.
Declining issues outnumbered advancers for a 1.36-to-1 ratio on the NYSE and for a 1.12-to-1 ratio on the Nasdaq.
The S&P index recorded 19 new 52-week highs and two new lows, while the Nasdaq recorded 35 new highs and 40 new lows.
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