U.S. stock market stumbles

Early gains for US stocks were erased by the close on Wednesday, with all three major Wall Street indices ending the day in negative territory, as the rebound from Monday's sell-off lost momentum.
On Tuesday, the Dow had managed a partial recovery after a sharp three-day decline that saw it lose 5.2% amid recession fears. However, the index fell again on Wednesday, closing down 0.6% at 38,763.45. The S&P 500 also saw a decline, slipping 0.8% to 5,199.50, while the Nasdaq fell 1.1% to 16,195.81.

The major indexes recovered

Indexes began the day on a positive note but started to lose momentum in the afternoon. Investor anxiety, following a recent sharp decline in global stocks, led to further losses after the Treasury auction, causing all three major indexes to turn negative. The declines deepened just before the close.
On Tuesday, the major indexes recovered some ground after a global market sell-off triggered by U.S. recession fears. The Dow ended the day up 293.66 points, or 0.76%, while the Nasdaq Composite and S&P 500 gained 1.03% and 1.04%, respectively.

Tuesday’s gains came on the heels of Wall Street’s worst trading day since 2022. On Monday, the Dow had plummeted more than 1,000 points amid a broad sell-off triggered by disappointing U.S. jobs data and fears of a slowdown in the world’s largest economy.

“A global recession has been predicted on and off for more than 18 months and, at least in the US so far, has failed to materialize,” said Sean Frank, chief investment officer at Cloud Equity Group. “The best recommendation for investors remains the same: Diversify your portfolio.”

The Cboe Volatility Index, often referred to as Wall Street’s “fear gauge,” was trading near 28 after dipping as low as 22 earlier on Wednesday. This significant drop from around 65 on Monday suggests that investor fears are easing, though they remain higher than at the beginning of the month.

Market Movers

Airbnb

Airbnb saw its shares plunge 13% after reporting second-quarter results that missed expectations and offering third-quarter revenue guidance that disappointed investors.

Lyft

Lyft, despite achieving its first profitable quarter due to a record number of rides, saw its shares dive 17% after delivering a less-than-expected forecast for the current quarter.

Disney

Disney exceeded estimates with its first-ever profit from streaming, but shares fell 4% as the company cautioned about possible weakness at its theme parks.

CVS

CVS Health's stock dropped 3% following a reduction in its full-year profit forecast and a plan to cut up to $2 billion in expenses due to rising insurance costs.

Tesla

Tesla's shares fell 4% after it issued a software update to nearly 1.7 million cars in China to address a bonnet latch issue, a problem that had previously affected a similar number of vehicles in the US.

The trend of leading stocks

On Wednesday afternoon, chip stocks led the declines, with Nvidia (NVDA), a favorite among AI investors, falling 5.1%. Broadcom (AVGO), Intel (INTC), and Arm Holdings (ARM) also experienced notable drops. Nvidia partner Super Micro Computer (SMCI) plummeted 20% after its results and outlook missed expectations, coupled with a 10-for-1 stock split announcement.

Large-cap tech stocks, which had initially pushed the broader market higher, ended mixed. Microsoft (MSFT), Meta Platforms (META), and Tesla (TSLA) retreated, while Apple (AAPL) and Amazon (AMZN) made gains.

Disney (DIS) saw its shares fall 4.5% despite posting results that exceeded Wall Street estimates, driven by box office hits like "Inside Out 2" and its first-ever streaming profit. However, concerns about weakness in its theme parks business dampened investor sentiment.

In other earnings reports, Airbnb (ABNB) fell 13% due to concerns about slowing U.S. demand, Novo Nordisk (NVO), maker of Ozempic, dropped 8.4%, and CVS Health (CVS) declined 3.2%.