Close: Rebound effort fizzles in a hurry on familiar drivers

The S&P 500 fell 1.8% on Wednesday, tumbling further into correction territory, in a disappointing session. Investors sold into rebound attempts as the Russia-Ukraine situation only seemed to worsen.

The Nasdaq Composite dropped 2.6%, representing the weakness in the mega-caps/growth stocks. The Dow Jones Industrial Average fell 1.4%, and the Russell 2000 fell 1.8%.

The first rebound attempt was at the open, which saw the S&P 500 up as much as 0.9% amid gains in all 11 of its sectors. That was driven primarily by mechanical factors on the belief that the market was primed for a rebound. The market, however, quickly turned negative.

There were only lower highs as the session progressed, feeding into the general pessimism in the market and the negative price momentum. The latest Russia-Ukraine headlines kept the buyers in hiding.

Briefly, Ukraine declared a state of emergency and mobilized its reserves; the U.S. canceled diplomatic meetings with Russia and expanded sanctions to Nord Stream 2 AG and its corporate officers; and the Biden administration warned Ukraine of a full-scale Russian invasion within 48 hours, according to Newsweek .

The growth stocks were at the forefront of selling interest, taking the S&P 500 consumer discretionary (-3.4%) and information technology (-2.6%) sectors to the bottom of the standings. Right before the close, the S&P 500 briefly dipped below its Jan. 24 intraday low (4222.62).

The energy sector (+1.0%) was the only sector that closed higher, rising 1% even as oil prices settled lower ($92.12, -0.15, -0.2%).

Away from equities, there was no flight to safety in the Treasury market, once again suggesting that the stock market’s misery was owed to more than just geopolitics, namely the Fed potentially hiking into slower growth.

The 2-yr yield rose five basis points to 1.60%, and the 10-yr yield rose three basis points to 1.98%. The U.S. Dollar Index increased 0.2% to 96.21. On a related note, San Francisco Fed President Daly (not a voting FOMC member) said she supported removing accommodation, starting in March.

Wednesday’s economic data was limited to the weekly MBA Mortgage Applications Index, which dropped 13.1% following a 5.4% decline in the prior week. Looking ahead, investors will receive weekly Initial and Continuing Claims, New Home Sales for January, and the second estimate for Q4 GDP on Thursday.

  • Dow Jones Industrial Average -8.8% YTD
  • S&P 500 -11.3% YTD
  • Russell 2000 -13.4% YTD
  • Nasdaq Composite -16.7% YTD

Overseas:

  • Europe: DAX -0.4%, FTSE +0.1%, CAC -0.1%
  • Asia: Nikkei market closed, Hang Seng +0.6%, Shanghai +0.9%

Commodities:

  • Crude Oil +0.90 @ 92.18
  • Nat Gas +0.12 @ 4.61
  • Gold +3.20 @ 1909.30
  • Silver +0.28 @ 24.49
  • Copper -0.04 @ 4.47
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