Stock Market Today: Equity rebound proves short-lived, indexes end moderately lower on Wednesday

Wall Street's main indexes opened in negative territory on Wednesday
US GDP growth for Q4 got revised lower to 3.2%.
PCE inflation and Jobless Claims data will be released on Thursday.

Wall Street's main indexes recovered modestly after opening deep in negative territory on Wednesday, but the rebound ran out of gas and the equity boards closed in the red for the day. The S&P 500 (SPX) index fell 0.17% to close the session at 5,069.78. The Dow Jones (DJIA) was little changed to end at 38,949.02, while the Nasdaq (IXIC) lost 0.55% to finish at 15,947.74.

Stock market news

The Real Estate Sector rose 1.28% as the best-performing S&P 500 major sector on Wednesday, with the Communications Sector tumbling 0.92% for the day. The Technology Sector and the Health Sector declined 0.51% and 0.51% respectively to round out the bottom of the day's sector performance.

Axon Enterprises (AXON) climbed 13.759% through the day, ending at $309.22. On the other hand, Viatris Inc. (VTRS) backslid 7.1% to close at $12.29.

Assessing Tuesday's developments in financial markets, “among equities, there were some modest movements, with the S&P 500 (+0.17%) closing just below its all-time high, having basically been in a narrow band since the Nvidia results last week. Currently it’s down -0.21% for the week, meaning it still needs to recover a bit in order to achieve a joint record of 16 weekly advances in the last 18 (currently on 15/17 for first time since 1989),” said Jim Reid, global head of economics and thematic research at Deutsche Bank, and continued:

“Small-cap stocks continued to outperform, with the Russell 2000 up +1.34%, in contrast to the Dow Jones, which was down -0.25%. Tech stocks saw a marginal outperformance, with the NASDAQ up +0.37% and Magnificent 7 up +0.22%. It shows the signs of the times that Apple yesterday announced the closure of its electric car unit which it set up in 2014 that at one point promised autonomous driving within a reasonable timeframe. The fact that they did this partly to divert resources to AI shows how trends can change.”

US Q4 GDP growth revised lower, focus shifts to PCE inflation report

The US Bureau of Economic Analysis revised the annualized Gross Domestic Product (GDP) growth of the US in the fourth quarter lower to 3.2% from 3.3% in the initial estimate. Personal Consumption Expenditures (PCE) Price Index, the Federal Reserve’s (Fed) preferred gauge of inflation, figures will be scrutinized by market participants on Thursday.

The economic calendar will also feature on Thursday weekly Initial Jobless Claims for the week ending February 24, which is forecast to rise to 210,000 from 201,000 in the previous week.

The US Census Bureau reported on Wednesday that Durable Goods Orders declined by 6.1%, or $18 billion, to $276.7 billion in January. This reading followed the 0.3% decrease recorded in December and came in worse than the market expectation for a contraction of 4.5%.

US Core PCE Preview: Forecasts from nine major banks, a hot reading.

New York Fed President John Williams: Inflation outlook has improved, three rate cuts in 2024 a good baseline for Fed.

According to the CME FedWatch Tool, markets are nearly fully pricing in a no change in the Fed policy rate in March and see an 85% probability of another pause in May.

Salesforce Inc. (CRM), Snowflake Inc.(SNOW) and Monster Beverage Corp. (MNST) are among top companies that will release quarterly earnings reports after the closing bell on Wednesday.

Economic Indicator

United States Core Personal Consumption Expenditures - Price Index (MoM)

The Core Personal Consumption Expenditures (PCE), released by the US Bureau of Economic Analysis on a monthly basis, measures the changes in the prices of goods and services purchased by consumers in the United States (US). The PCE Price Index is also the Federal Reserve’s (Fed) preferred gauge of inflation. The MoM figure compares the prices of goods in the reference month to the previous month.The core reading excludes the so-called more volatile food and energy components to give a more accurate measurement of price pressures. Generally, a high reading is bullish for the US Dollar (USD), while a low reading is bearish.

Why it matters to traders

After publishing the GDP report, the US Bureau of Economic Analysis releases the Personal Consumption Expenditures (PCE) Price Index data alongside the monthly changes in Personal Spending and Personal Income. FOMC policymakers use the annual Core PCE Price Index, which excludes volatile food and energy prices, as their primary gauge of inflation. A stronger-than-expected reading could help the USD outperform its rivals as it would hint at a possible hawkish shift in the Fed’s forward guidance and vice versa.

S&P 500 FAQs

What is the S&P 500?

The S&P 500 is a widely followed stock price index which measures the performance of 500 publicly owned companies, and is seen as a broad measure of the US stock market. Each company’s influence on the computation of the index is weighted based on market capitalization. This is calculated by multiplying the number of publicly traded shares of the company by the share price. The S&P 500 index has achieved impressive returns – $1.00 invested in 1970 would have yielded a return of almost $192.00 in 2022. The average annual return since its inception in 1957 has been 11.9%.

How are companies chosen to be included in the S&P 500?

Companies are selected by committee, unlike some other indexes where they are included based on set rules. Still, they must meet certain eligibility criteria, the most important of which is market capitalization, which must be greater than or equal to $12.7 billion. Other criteria include liquidity, domicile, public float, sector, financial viability, length of time publicly traded, and representation of the industries in the economy of the United States. The nine largest companies in the index account for 27.8% of the market capitalization of the index.

How can I trade the S&P 500?

There are a number of ways to trade the S&P 500. Most retail brokers and spread betting platforms allow traders to use Contracts for Difference (CFD) to place bets on the direction of the price. In addition, that can buy into Index, Mutual and Exchange Traded Funds (ETF) that track the price of the S&P 500. The most liquid of the ETFs is State Street Corporation’s SPY. The Chicago Mercantile Exchange (CME) offers futures contracts in the index and the Chicago Board of Options (CMOE) offers options as well as ETFs, inverse ETFs and leveraged ETFs.

What factors drive the S&P 500?

Many different factors drive the S&P 500 but mainly it is the aggregate performance of the component companies revealed in their quarterly and annual company earnings reports. US and global macroeconomic data also contributes as it impacts on investor sentiment, which if positive drives gains. The level of interest rates, set by the Federal Reserve (Fed), also influences the S&P 500 as it affects the cost of credit, on which many corporations are heavily reliant. Therefore, inflation can be a major driver as well as other metrics which impact the Fed decisions.

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