Disappointing Earnings, Economic News Leads To Sell-Off On Wall Street

Stocks have moved sharply lower over the course of morning trading on Wednesday, largely offsetting the rally seen in the previous session. The major averages have pulled back sharply after ending Tuesday’s trading at their best closing levels in a month.

Currently, the major averages are lingering near their worst levels of the day. The Dow is down 713.19 points or 3 percent at 23,236.57, the Nasdaq is down 187.61 points or 2.2 percent at 8,328.13 and the S&P 500 is down 83.26 points or 2.9 percent at 2,762.80.

The sharp pullback on Wall Street comes as the latest earnings and economic news has reminded investors of the devastating economic impact of the coronavirus pandemic.

Financial giants Bank of America (BAC), Goldman Sachs (GS) and Citigroup (C) are all seeing notable weakness after reporting sharply lower first quarter earnings.

The steep drop in earnings comes as the major banks set aside billions of dollars to prepare for a flood of defaults on loans due to the coronavirus-induced economic shutdown.

Adding to the negative sentiment, the Commerce Department released a report showing a sharp decline in U.S. retail sales in the month of March.

The Commerce Department said retail sales plummeted by 8.7 percent in March after falling by a revised 0.4 percent in February.

Economists had expected retail sales to plunge by 8.0 percent compared to the 0.5 percent drop originally reported for the previous month.

Excluding a nosedive in sales by motor vehicle and parts dealers, retail sales still tumbled by 4.5 percent in March following a 0.4 percent decrease in February. Ex-auto sales were expected to slump by 4.8 percent.

A separate report from the New York Federal Reserve showed New York manufacturing activity contracted at the fastest rate on record in the month of April.

The New York Fed said its general business conditions index plummeted to a negative 78.2 in April from a negative 21.5 in March, with a negative reading indicating a contraction in regional manufacturing activity. The index was expected to slump to a negative 35.0.

With the much bigger than expected nosedive, the general business conditions index plunged to its lowest level in the history of the survey—by a wide margin.

Just before the start of trading, the Federal Reserve released a report showing the biggest monthly drop in U.S. industrial production in over seventy years in the month of March.

The report said industrial production plunged by 5.4 percent in March after rising by a downwardly revised 0.5 percent in February.

Economists had expected production to tumble by 4.0 percent compared to the 0.6 percent increase originally reported for the previous month.

The Fed said the bigger than expected nosedive in industrial production reflected the biggest monthly decrease since January of 1946.

Additionally, the National Association of Home Builders released a report showing a record monthly decline in homebuilder confidence in April.

The report said the NAHB/Wells Fargo Housing Market Index plummeted to 30 in April after slipping to 72 in March. Economists had expected the index to tumble to 55.

The steep drop reflected the largest single monthly change in the history of the index and marks the lowest builder confidence reading since June 2012.

Energy stocks have helped to lead the way lower as the price of crude oil has dropped below $20 a barrel, with crude for May delivery currently slipping $0.16 to $19.95 a barrel.

Reflecting the weakness in the energy sector, the Philadelphia Oil Service Index is down by 8.4 percent, the NYSE Arca Oil Index is down by 7.7 percent and the NYSE Arca Natural Gas Index is down by 6.2 percent.

The disappointing earnings news is also contributing to considerable weakness among banking stocks, as reflected by the 5.9 percent nosedive by the KBW Bank Index.

Most of the other major sectors have also moved sharply lower on the day, with significant weakness visible among steel, housing, commercial real estate and chemical stocks.

In overseas trading, stock markets across the Asia-Pacific region moved mostly lower during trading on Wednesday. Japan’s Nikkei 225 Index fell by 0.5 percent, while China’s Shanghai Composite Index slid by 0.6 percent.

The major European markets have also shown significant moves to the downside on the day. While the U.K.’s FTSE 100 Index has plummeted by 3.1 percent, the French CAC 40 Index and the German DAX Index are down by 3.5 percent and 3.6 percent, respectively.

In the bond market, treasuries have moved sharply higher following the slew of disappointing economic data. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, is down by 12.3 basis points at 0.629 percent.

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