US Stocks Plunge Ahead Of FOMC Minutes As Debt Ceiling Talks Show Little Progress: Investors Flock To Cash As Risk-Off Mood Returns

Risk sentiment took a severe hit on Wednesday, with investors fleeing stocks for cash as debt negotiations between the White House and GOP grind on. House Speaker Kevin McCarthy said the parties are still far apart on a number of things. 

Markets are anxiously awaiting the minutes from the May FOMC meeting, due at 2 p.m. ET, for more hints about upcoming Fed actions. Investors will also be watching Nvidia Corp. NVDA's earnings report, which will be issued after the market close.

Cues From Wednesday’s Trading:

The S&P 500 was down 0.9% at lunchtime Wednesday, matching the Dow Jones daily performance, while the tech-heavy Nasdaq 100 was 1.1% lower. The Russell 2000 fell 1.2%. 

U.S. Indices' Performance On Wednesday

Index	Performance (+/-)		Value
Nasdaq 100	-1.1%		13,546.18
S&P 500 Index	-0.94%		4,106.57
Dow Industrials	-0.86%		32,772.54

Analyst Color:

The market could be waiting on that one spark to lift it, given there is a tremendous amount of cash on the sidelines, said fund manager Louis Navellier.

The spark that triggers cash flowing from the sidelines into the market could be any positive news emerging from the technology sector, such as Apple, Inc.’s AAPL new iPhone announcement in September, he said.

Given 2024 is a presidential election year, the Federal Reserve, not wanting to be part of the economic debate, may begin to cut interest rates either later this year or in early 2024, the fund manager said. This could also provide the market the spark it needs, he added. 

“It is important to realize that there is going to be wave after wave of positive news on inflation, interest rates and economic growth that will be coaxing investors back into the stock market,” Navellier said.

Wednesday's Trading In Major US Equity ETFs: In midday trading on Wednesday, the SPDR S&P 500 ETF Trust SPY was down 1% to $410, the SPDR Dow Jones Industrial Average ETF DIA fell 0.9% to $327.60 and the Invesco QQQ Trust QQQ was 1% lower to $329.94, according to Benzinga Pro data.

All U.S. equity sectors were negative, except for the Energy Select Sector SPDR Fund XLK, up 0.7% on the back of rising oil and natural gas prices. 

The weakest performers were the Real Estate Select Sector SPDR Fund XLRE, down 2%; the Financial Select Sector SPDR Fund XLF, down 1.7%; and the Technology Select Sector SPDR Fund XLK, down 1.3%.

Latest Economic Data:

The Mortgage Bankers Association reported a 4.6% decline in weekly mortgage application volume last week, after falling 5.7% previously.

Treasury Secretary Janet Yellen held a speech at Wall Street Journal's CEO Council Summit reiterating that the government is highly likely to run out of cash in early June, saying that "there will be some obligations we will be unable to pay, post-x-date."

The Energy Information Administration reported a surprising slump in crude oil inventories by 12.456 million barrels in the week ending May 19, 2023, the most since November 2022 and compared with market expectations of a 0.775-million injection

Fed Governor Christopher Waller said that "prudent risk management may suggest skipping a hike in June, and leaning toward a July hike depending on inflation data and if banking conditions haven't tightened excessively."

The minutes of the May monetary policy meeting of the Federal Open Market Committee are due at 2 p.m. EDT. The central bank toned down the pace of the rate hike to 25 basis points at the meeting and also removed a reference that suggested that further rate hikes are warranted. Traders may sift through the minutes for any read-through for the future rate trajectory.

See also: Best Futures Trading Software

Stocks In Focus:

• Palo Alto Networks, Inc. PANW climbed about 8%  following better-than-expected quarterly results.
• Analog Devices, Inc. ADI plummeted 8%, on pace for largest daily decline since March 18, 2020, despite the company reporting slightly better-than-expected results last quarter. 
• Reacting to its quarterly results, homebuilder Toll Brothers, Inc. TOL rose about 3.5%.
• Agilent Technologies, Inc. A sunk 8% despite a positive earnings report, as the CEO said that demand from small biotechs nearly "shut down." 
• Intuit Corp. INTU moved to the downside after its financial results.
• Notable companies due to release their quarterly results after the close include Nvidia, American Eagle Outfitters, Inc. AEO, e.l.f. Beauty, Inc. ELF, Guess?, Inc. GES, Splunk, Inc. SPLK and Snowflake, Inc. SNOW.

Commodities, Bonds, Other Global Equity Markets:

Crude oil fell 0.6%, with a barrel of WTI-grade crude falling to $73.30. The United States Oil Fund ETF USO was 0.3% higher to $65.10 per share.  

Treasury yields rose, with the 10-year yield up by 3 basis points to 3.73% and the two-year yield up 4 basis points to 4.36%. The iShares 20+ Year Treasury Bond ETF TLT was 0.3% lower for the day. 

The dollar strengthened, with the U.S. dollar index, which is tracked by the Invesco DB USD Index Bullish Fund ETF UUP, up 0.3%. The EUR/USD pair, which is tracked by the Invesco CurrecyShares Euro Currency Trust FXE, was 0.1% lower to 1.0760.

European equity indices plummeted. The SPDR DJ Euro STOXX 50 Etf  FEZ fell 1.5%. 

Gold fell 0.8% to $1,960/oz. The SPDR Gold Trust GLD was 0.7% lower to $182. Silver dipped 1.6% to $23.08, with the iShares Silver Trust SLV down 1.4% to $21.21 per unit. Bitcoin BTC/USD fell 3.7% to $26,215.

Staff writer Piero Cingari updated this report midday Wednesday. 

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