After a late afternoon fade, the S&P 500 fell 0.1% while the Nasdaq dropped 1.2%. After receiving a boost from IBM, the Dow Jones Industrial Average rose 0.7% after it received 7.1% following reporting quarterly results that exceeded analysts' expectations.
Netflix fell 35.1% one day after it reported its first drop in subscribers in over a decade. It also stated that it expected a sharper drop in subscribers during the current quarter. Netflix is currently considering making changes it has been resisting for years, such as limiting password sharing and creating an affordable subscription option that can be supported by advertising. Netflix stock is currently down 67% from its November record.
The S&P 500 was hit hard by Netflix's collapse, which has been one of Wall Street’s Big Tech high-flyers in recent years. It also outweighed gains in other benchmarks. This sector, which is a communication services sector, suffered 4.1% less.
Randy Frederick, vice-president of trading & derivatives, Charles Schwab, stated that while it is in communications services, it is also discretionary stock.
The market was also affected by technology stocks, retailers, and other businesses that depend on consumer spending. Nvidia chipmaker fell 3.2%, while Amazon fell 2.6%.
The biggest gains were in health care stocks. CVS rose 2.7%, and Boston Scientific, a medical device manufacturer, gained 3%.
The market's decline was also stopped by banks and household product manufacturers. JPMorgan Chase was up 0.4%, Charmin and Dawn maker Procter & Gamble rose 2.7% following beating analysts' quarterly earnings forecasts.
After reporting net earnings of over seven times more than last year, Tesla saw a 4% increase in after-hours trading. Strong sales helped the electric vehicle and solar panel companies despite China's supply chain problems and production cuts due to pandemics.
The S&P 500 fell 2.76 points to 4,459.45. The Nasdaq dropped 166.59 to 13,453.07. The Dow gained 249.59 points to 35.160.79.
The stock of smaller companies held up better than the wider market. Russell 2000 gained 7.42 points or 0.4% to 2,038.19.
Investors will continue to focus on the latest round corporate earnings, as they attempt to understand how companies deal with rising inflation. American Airlines and Union Pacific will report their results on Thursday.
Inflation is putting pressure on many industries and reducing consumer spending. Inflation's effects have been tempered by the Federal Reserve and other central bankers raising interest rates to offset rising prices. Wall Street anticipates a half percentage rate increase at the Fed's next meeting in two week. The Fed already announced a quarter point rate rise.
Scott Wren, senior global strategist at Wells Fargo Investment Institute, stated that "the market knows that the Fed is going to raise rates a lot." "But, the market feels pretty good that once you get to neutral, then maybe you don't move much further in 2023."
When interest rates do not restrict or push economic growth, they are considered neutral. According to CME Group's FedWatch, investors are expecting rate hikes that will raise the benchmark interest rate to between 2.50% to 3% by year end.
As Wall Street prepares to raise interest rates, bond yields have been increasing throughout the year. Although the yield on the 10-year Treasury Note fell to 2.84% late Tuesday from 2.91%, it is still close to its highest level since 2018.
The higher bond yields have pushed up mortgage rates, increasing the pressure on an already tight housing market. According to the National Association of Realtors, home sales in the United States fell in March at the slowest rate in almost two years. This was due to record-high prices and higher mortgage rates.
Russia's invasion and ongoing conflict in Ukraine has raised concerns about rising inflation, which could impede economic growth. The conflict has driven commodity and energy prices higher.
U.S. crude oil prices increased 0.2% Wednesday, and are now up almost 40% for the year. This has pushed gasoline prices higher. Wheat prices have risen 41% over the past year, which could raise prices for a wide variety of food products around the world.
The confluence of worries has caused stock markets to struggle this year. However, China's virus lockdowns are decreasing. The Shanghai authorities allowed 4,000,000 people to leave their homes but the lockdowns left China's economy in ruins.