Another torrent of selling gripped Wall Street on Wednesday, with the Dow Jones industrial average dropping more than 600 points and the benchmark Standard & Poor’s 500 index extending its losing streak to a sixth day.
The tech-heavy Nasdaq composite bore the brunt of the sell-off. It ended more than 10% below its August peak, putting it in what Wall Street calls a correction. The Dow and S&P 500 have erased their gains for the year.
Disappointing quarterly results and outlooks weighed on the market, stoking investors' jitters over future growth in corporate profits. Bond prices continued to rise, sending yields down, as traders sought traditionally safer investments.
“Investors are on pins and needles,” said Erik Davidson, chief investment officer at Wells Fargo Private Bank. “There has definitely been a change in sentiment for investors starting with the volatility we had last week. The sentiment and the outlook seem to be turning more negative, or at the very least less rosy.”
Investors have grown concerned in recent weeks that corporate America's earnings growth this year — fueled by President Trump’s tax cuts — will be arrested in coming months amid rising inflation, uncertainty over the escalating U.S.-China trade war and the likelihood of higher interest rates. Recent data showing the housing market is slowing have also fueled speculation that U.S. economic growth will start to slow next year.
Outlooks from some of the companies that reported third-quarter results this week — including Caterpillar, 3M and United Parcel Service — stoked those worries.
“You've seen more discouraging [company] commentary this quarter than you have the last two,” said Tom Martin, senior portfolio manager with Globalt Investments. “You're really starting to get more of a groundswell of caution. There's some concern about the fourth quarter and what that's going to look like.”
The S&P 500 dropped 84.59 points, or 3.1%, to 2,656.10. The index is now off about 9.4% from its Sept. 20 peak.
The Dow slid 608.01 points, or 2.4%, to 24,583.42.
The Nasdaq sank 329.14 points, or 4.4%, to 7,108.40. That was its biggest one-day drop since August 2011, but it’s still up 3% this year.
The Russell 2000 index of smaller-company stocks fell 57.89 points, or 3.8%, to 1,468.70. It's down 4.4% for the year.
Bond prices rose, sending the yield on the 10-year Treasury note down to 3.11% from 3.16%, as traders sought lower-risk assets.
Technology firms and media and communications companies accounted for much of the selling. Banks, healthcare firms and industrial companies also took heavy losses, outweighing gains by utilities and other high-dividend stocks.
Most companies that missed earnings expectations or issued cautionary outlooks were punished.
AT&T sank 8.1% to $30.36 after reporting weak subscriber numbers, and chipmaker Texas Instruments dropped 8.2% to $92.01 after reporting slumping demand.
Shares of iRobot dived 12.3% to $80.49 after the robotics technology company said tariffs will reduce its profitability in the fourth quarter.
United Parcel Service slid 5.5% to $107.93 after the shipping company reported weak international revenue, while the strong dollar and high fuel prices also hurt its results.
S&P 500 companies are expected to deliver 22% earnings growth for the third quarter, with every sector except communications services — which includes Walt Disney, AT&T, Netflix and Alphabet, Google’s parent company — expected to show earnings growth, according to S&P Global Market Intelligence.
About 24% of the companies in the S&P 500 had reported third-quarter results as of Wednesday. Of those, 57% delivered earnings and revenue results that topped Wall Street's forecasts.
Highflying companies such as Netflix and Amazon took some of the biggest losses Wednesday. Netflix dropped 9.4% to $301.83. Amazon slid 5.9% to $1,664.20.
The Commerce Department said sales of new U.S. homes plunged 5.5% in September, the fourth monthly drop. The report is the latest sign that the housing market is cooling amid rising mortgage rates. Several home builders’ shares declined after the release of the report. Beazer Homes USA slumped 8.4% to $8.44.
Boeing was one of the few gainers Wednesday. It rose 1.3% to $354.65 after the defense contractor posted quarterly results that beat analysts' forecasts and raised its estimates for the year, citing faster orders for aircraft.
Despite the tumbling stock prices, the U.S. economy looks solid. Helped by tax cuts, the economy expanded at a 4.2% annual pace in April through June, the fastest in nearly four years. The Commerce Department report on third-quarter growth, due out Friday, is expected to show another solid pickup: growth at a 3.3% pace. Unemployment has dropped to a 49-year-low of 3.7%.
Responding to the healthy growth, the Federal Reserve has raised interest rates three times this year and is expected to raise them again in December.
Benchmark U.S. crude edged up 0.6% to $66.82 a barrel in New York. Brent crude, used to price international oils, slid 0.4% to $76.17 a barrel in London.
Heating oil was little changed at $2.25 a gallon. Wholesale gasoline slipped 0.8% to $1.82 a gallon. Natural gas declined 1.4% to $3.17 per 1,000 cubic feet.
The dollar slipped to 112.44 yen from 112.47 yen. The euro fell to $1.1387 from $1.1467.
Gold fell 0.5% to $1,231.10 an ounce. Silver fell 0.8% to $14.68 an ounce. Copper was little changed at $2.76 a pound.