Nasdaq, S&P 500 on track to snap three-day rally, Dow boosted by Visa

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U.S. stocks were struggling on Wednesday, as a slide in shares of megacap technology firms and Boeing outweighed falling Treasury yields. The Dow was hovering just below the flatline, while the Nasdaq and S&P were on track to snap a three-day win streak. The dollar (DXY) declined.

In what has been a volatile trading day, all three major indices earlier opened deep in the red, but began to pare losses soon after, with the S&P and Dow rising as much as 0.7% and 1.1%, respectively.

By late afternoon, the tech-heavy Nasdaq Composite (COMP.IND) was down 1.87% at 10,990.01 points, with Microsoft and Alphabet both falling more than 6% after disappointing quarterly reports.

The benchmark S&P 500 (SP500) was 0.68% lower at 3,832.87 points. The blue-chip Dow (DJI) had lost 0.01% to 31,833.22 points, as a slump in shares of Boeing countered a boost provided by a jump in Visa.

Technology giants Apple, Amazon and Meta declined 2-6%. The Facebook parent is set to report results after the bell, with the iPhone maker and Amazon on tap on Thursday.

Five of the 11 S&P sectors were in the red, with megacap sectors Communication Services and Information Technology the top losers. Energy and Health Care were the top gainers.

Treasury yields extended their losses from the previous session. The 10-year Treasury yield (US10Y) was down 9 basis points to 4.02%, near one-week lows. The 2-year yield (US2Y) was down 6 basis points to 4.42%.

Falling yields had helped all three major U.S. indices record a three-day win streak on Tuesday.

“Rates are really driving U.S. equity markets,” Jefferies’ strategist Steven DeSanctis told Seeking Alpha.

“In the last week or so there has been some stability in the rates market, with the rates coming down… Yields may have peaked at least here in the short run and that’s driving stocks,” DeSanctis added.

The rally in U.S. stocks has also been driven by hopes that the Federal Reserve will slow its rate-hike pace.

“We continue to try to work out whether Friday’s WSJ article by Nick Timiraos marks the start of the 6th attempt at a sustained Fed pivot narrative over the last 12 months,” Deutsche Bank’s Jim Reid wrote. “After a bit of push/pull on rates after the immediate Timiraos-led move, yesterday saw a fresh rates (and equity) rally on the back of obviously weaker economic data,” he added.

However, a narrower-than-expected fall in new homes sales for September gave some pause to the hopes of a Fed pivot. On top of that, U.S. 30-year mortgage rates also marked their highest reading in over a decade.

“The decline in September new home sales still leaves them much higher than is implied by mortgage demand, after sales surged in August,” Pantheon Macro said in a note. “This disconnect between sales and mortgage demand likely reflects buyers rushing to lock in mortgage deals before rates spiked higher; the 30-year mortgage rate held broadly steady through July and August but has since risen by nearly 140bp, to 7.16% last week.”

In earnings news, Visa, the world’s largest payments processor, gained on strong quarterly results and a new buyback program. Airplane maker Boeing slid after reporting a revenue miss. Streaming giant Spotify slumped after a disappointing earnings report.

Among other active stocks, Netflix was the only member of the FAANG in the green as it continued a rally. Hard drive maker Seagate slumped after its results missed estimates.

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