U.S. stocks fell on Wednesday, as investors confronted less-than-expected earnings outlooks and concern deepened about emerging markets as Wall Street braced for the Federal Reserve’s next move on stimulus.
Stock-index futures had rallied along with Turkish equities and Turkey’s currency after Turkey hiked its interest rates, but all reversed course, with the Turkish lira weakening regardless of its central bank’s rate hike.
“Earnings so far have been nothing to write home about, and it seems that no matter what, the market has found something imperfect even in the best of earnings,” said JJ Kinahan, chief strategist at TD Ameritrade.
“There continues to be growing concerns over emerging markets and that we may have some problems there,” Kinahan added.
“It’s picking your poison, at least in Turkey; it’s the right Volcker-type move in the long term, but in the short term it can do a lot of damage to economic growth,” Peter Boockvar, chief market analyst at the Lindsey Group, said of the Turkish action, which was followed by an unexpected increase in its benchmark rate by the South Africa Reserve Bank. “Right now central banks are in a no-win situation,” Boockvar added.
The market’s swoon came as the Fed wraps up a two-day session, its final meeting with Chairman Ben Bernanke at the helm. Most analysts expect the Fed will announce a second $10 billion reduction in its month bond buys, to $65 billion.
“The Fed would lose a lot of credibility if they blink over emerging markets. They have to act cool and collected by sticking to their plan of focusing on the U.S. economy. Looking ahead, it makes Janet Yellen’s March press conference more interesting,” said Boockvar of the next Fed chairman.
|DJIA||Dow Jones Industrial Average||15821.99||-106.57||-0.67%|
|S&P 500||S&P 500 Index||1784.53||-7.97||-0.44%|
|NASDAQ||Nasdaq Composite Index||4086.00||-11.96||-0.29%|
After plunging as much as 174 points, the Dow Jones Industrial Average was more recently down 100.63 points, or 0.7 percent, to 15,828.13, with Boeing and AT&T leading declines, the former down nearly 5 percent and the latter off 2.8 percent. Of the blue-chip index’s 30 components, 24 were in the red.
The S&P 500 lost 8.99 points, or 0.5 percent, to 1,783.51, with telecommunications and consumer staples leading declines that included all but two – utilities and consumer staples – of its 10 major industry groups.
The Nasdaq declined 16.44 points, or 0.4 percent, to 4,081.52.
The CBOE Volatility Index (VIX), a measure of investor uncertainty, rose 9.8 percent to 17.34.
For every stock rising, just over two fell on the New York Stock Exchange, where 213 million shares traded as of 11:25 a.m. Eastern. Composite volume approached 1.3 billion.
On Tuesday, stocks rallied, with the Dow rebounding after a five-session rout, as investors embraced better-than-expected quarterly earnings from companies including D.R. Horton and Pfizer.
—By CNBC’s Kate Gibson