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It remains to be seen whether Federal Reserve Chair Jerome Powell will be renominated.
Olivier Douliery/AFP/Getty Images
Stocks were falling on Wednesday as the corporate bond market was sending a somewhat troublesome message.
In afternoon trading, the Dow Jones Industrial Average fell 223 points, or 0.6%, after the index climbed 54 points Tuesday to close at 36,142. The S&P 500—which remains just shy of its record high—was down 0.2%. The Nasdaq Composite was down 0.3%.
Credit markets were sending a negative signal about corporate profits. The iShares iBoxx High Yield Corporate Bond exchange-traded fund (ticker: HYG) has seen its share price fall 0.9% since Nov. 5, when it hit a more than one-month high. That means investors are moving out of risky corporate bonds, which indicates less confidence in companies’ ability to repay debts. The bond ETF was down 0.1% Wednesday.
Plus, credit spreads—the extra yield investors demand for buying risky credit over safe government bonds—have widened; a high yield bond index from Bank of America now shows a spread of 3.1 percentage points, up from 3.08 earlier this month, according to the St. Louis Fed. Essentially, investors are demanding a higher return on those bonds—by sending their prices down—in return for their higher perceived risk.
“These are worrisome trends,” wrote NatAlliance Securities’ Andrew Brenner.
Meanwhile, Treasury Secretary Janet Yellen said that the government could fail to meet its financial obligations by Dec. 15 if Congress does not raise the debt ceiling. Part of the concern is a transfer the government will have to make soon related to the $1 trillion infrastructure bill President Biden signed this week.
That’s slight a concern for markets, but it’s likely to subside as the government is expected to resolve the issue soon. “The market knows that Washington, D.C. waits until the last minute,” said Dave Wagner, portfolio manager and analyst at Aptus Capital Advisors. “There’s volatility surrounding that entire event.”
Elsewhere, U.K. inflation was higher than expected. Prices rose 4.2% year-over-year, against expectations of 3.9% and higher than the previous reading of 3.1%. That could make the Bank of England, which had recently said it will hold off on raising interest rates, more compelled to hike.
Overseas, Tokyo’s
Nikkei 225
declined 0.4%. The
FTSE 100
fell 0.5% in London, underperforming other European indexes.
Here are seven stocks on the move Wednesday:
Visa
(ticker: V) stock dropped 6.8% after
Amazon.com
(AMZN) said it will stop accepting Visa U.K. credit cards because of the card issuer’s high fees.
Target
(TGT) stock fell 4.9% after the company reported a profit of $3.03 a share, beating estimates of $2.83 a share, on sales of $25.65 billion, above expectations for $24.78 billion.
TJX Cos.
(TJX) stock rose 6.9% after the company reported a profit of 84 cents a share, beating estimates of 81 cents a share, on sales of $12.5 billion, above expectations for $12.3 billion.
Lowe’s Cos.
(LOW) stock gained 1.5% after the company reported a profit of $2.72 a share, beating estimates of $2.36 a share, on sales of $22.9 billion, above expectations for $22.1 billion.
Roku
(ROKU) stock fell 12% after getting downgraded to Sell from Neutral at Moffett Nathanson.
Tesla
(TSLA) stock was up 3.7%, building on gains of 4.1% Tuesday, as the stock continues to rally after coming under pressure amid the sale of shares by CEO Elon Musk.
Nvidia
(NVDA) stock fell 2.2% ahead of earnings coming later in the day.
Write to Jacob Sonenshine at jacob.sonenshine@barrons.com
Read More:Stock Market Today: Dow Falls From Highs, Target and Visa Shares Tumble
2021-11-17 19:32:00