U.S. Stocks Plunge on Earnings Concerns, Rising Treasury Yields

The major U.S. stock index futures sold off sharply on Wednesday, posting their worst performances in nearly two months. The selling was primarily driven by disappointing earnings reports. Investors also expressed concerns over rising bond yields.

The blue chip Dow Jones Industrial Average fell in reaction to a 2.8 percent drop in Boeing. The company blamed the loss on declines in revenue. The benchmark S&P 500 Index had its worst day since September 5. It was dragged down by a drop in telecommunication stocks. Chipotle Mexican Grille was the biggest decliner in the index, dropping 14.6 percent after its quarterly results missed the mark.

Chip maker Advanced Micro Devices beat the Street on earnings and revenue, but dropped 13.5 percent anyway after it forecast a drop in revenue for the current quarter.

A rise in Treasury yields also dampened sentiment on stocks. Some investors may have moved money out of stocks and into Treasurys to take advantage of the risk-free return.

U.S. Economic Data

Core Durable Goods Orders rose 0.7% and Durable Goods Orders rose 2.2%. Traders were looking for an increase of 0.5% and 1.0 percent respectively.

The Commerce Department said on Wednesday non-defense capital goods orders excluding aircraft, a closely watched proxy for business spending plans, rose 1.3 percent last month after an upwardly revised 1.3 percent increase in August.

The government also said it was unable to isolate the effects of Hurricanes Harvey and Irma on the data as the survey is “designed to estimate the month-to-month change in manufacturing activity at the national level and not at specific geographic areas.”

The Home Price Index rose 0.7% versus a 0.4% estimate and New Home Sales jumped to 667K units versus a 555K estimate. The rise in new home sales was a surprise as sales hit their highest level in nearly 10 years.

Gold

Gold had a volatile session on Wednesday. Early in the day, the market was driven into a 2 ½ month low after reports that Republican senators told President Trump that they favored Stanford University economist John Taylor as the next head of the U.S. Federal Reserve.

The news drove up U.S. Treasury yields which also helped underpin the U.S. Dollar. The stronger dollar pressured demand for dollar-denominated gold.

The market turned around late in the session and was able to close slightly higher after a steep drop in U.S. equity markets sent investors into the safety of gold.

Crude Oil

U.S. West Texas Intermediate and international-benchmark Brent crude oil finished mixed on Wednesday.

Brent crude was supported by comments from Saudi Arabia’s energy minister on Tuesday reiterating the country’s determination to end a three-year supply glut. WTI crude was pressured by a surprise build in weekly crude inventories.