U.S. stocks on Wednesday overcame a lower open to trade mixed, though moves remained small. A post-earnings slide in Uber (UBER) and a decline in Intel (INTC) sparked by a guidance cut weighed on sentiment.
Monetary policy grabbed a chunk of the spotlight, after Sweden’s central bank became the second major economy to cut interest rates. Market participants pondered the ramifications of the move – if any – in terms of the Federal Reserve’s expected easing later in the year.
Wall Street’s three major averages opened in the red but began to move higher soon after. They were last mixed approaching mid-day, remaining close to the flatline. The tech-heavy Nasdaq Composite (COMP:IND) was down 0.23% to 16,295.02 points, while the benchmark S&P 500 (SP500) was lower by 0.07% to 5,184.01 points. The blue-chip Dow (DJI) was slightly up 0.23% to 38,973.60 points.
Of the 11 S&P sectors, six were in the red.
Uber Technologies (UBER) shed ~8% and was the top percentage loser on the S&P (SP500). The ride-hailing giant turned in a surprise quarterly loss and missed consensus estimates on a key revenue metric. Conversely, smaller rival Lyft (LYFT) surged after it narrowed its losses and showed a strong gain in gross bookings.
Intel (INTC) fell nearly 3% and was among the top percentage losers on both the Nasdaq (COMP:IND) and the Dow (DJI). The chip giant confirmed that the U.S. government had revoked export licenses that allowed it to supply Chinese telecom firm Huawei. As a result, Intel (INTC) lowered its current quarter revenue guidance.
Market participants will have more earnings reports to wade through after hours, including results from vacation rental firm Airbnb (ABNB) and British chip designer Arm (ARM).
Earlier in the day, global central bank action took the spotlight. The Riksbank cut its key policy rate for the first time since 2016, becoming the second major economy to kick off a monetary policy easing cycle following the Swiss central bank in March. “Inflation is approaching the target while economic activity is weak,” Riksbank said.
At home, investors will no doubt be once again wondering whether the moves in Europe will influence the Fed in any way. Recent data in the U.S. has clouded interest rate cut expectations as inflation has remained sticky, the labor market has remained resilient and the economy has continued to show signs of slowdown.
“This morning the Riksbank followed the Swiss National Bank as the second of the advanced economies to cut rates this cycle. Expectations are high that the (European Central Bank) will follow in 4 weeks’ time. However, the potentially imminent European easing cycle has raised some eyebrows in terms of timing and how much they can cut before the Fed start their own easing cycle,” Deutsche Bank’s Jim Reid said.
Citing Deutsche Bank data, Reid added that over the last 65 years the German Bundesbank or the European Central Bank (ECB) “have not eased before the Fed, apart from in 2011 when the ECB cut rates due to the Sovereign crisis when the Fed was already at zero and didn’t cut rates further. Outside of that period … the Fed has had more easing cycles and where they coincide, they have always previously been the first to cut.”
“So assuming the ECB does cut rates next month as expected, and the Fed remains on hold for at least the next several months before easing, it will be a unique event in modern times,” Reid added.
Turning to the fixed-income markets, U.S. Treasury yields were mixed ahead of a $42B 10-year note auction in the afternoon. The longer-end 30-year (US30Y) and 10-year yields (US10Y) were both up 3 basis points each to 4.63% and 4.49%, respectively. The shorter-end more rate-sensitive 2-year yield (US2Y) was down marginally to 4.84%.
See live data on how Treasury yields are doing across the curve at the Seeking Alpha bond page.
