Nasdaq 100 Falls Over 2% as Bond Yields Rise

Wall Street grappling with a batch of corporate earnings sent stocks lower on Wednesday amid heightened Treasury volatility, with traders also keeping an eye on the latest geopolitical developments.

The S&P 500 dropped about 1.4%, and the Nasdaq 100 lost roughly 2.4% as of 3:00 p.m. in New York.

Google’s parent Alphabet Inc.’s disappointing cloud figures outweighed Microsoft Corp.’s sales. A gauge of chipmakers slid 4% on Texas Instruments Inc.’s bearish forecasts.

Longer-dated U.S. yields outpaced those in shorter-maturity bonds — a process known as “bear steepening.”

Oil rose to $85 after a news report that Israel agreed to delay the ground invasion of Gaza to protect U.S. troops.

Traders are looking for evidence on how companies are coping with high interest rates and whether consumer spending is changing because of inflation. Facebook parent Meta Platforms Inc. is set to report its numbers later Wednesday, with Amazon.com Inc.’s results due Thursday.

“The question now turns to earnings as earnings drive stock prices,” said Howard Ward, chief investment officer of Growth Equities and portfolio manager at Gabelli Funds. “This is where the rubber meets the road. A recession would result in higher unemployment, less consumer spending, slower gross domestic product growth and lower earnings, which implies lower stock prices.”

Economists often look to the Treasury market for clues about when a recession might come. Specifically, they examine the so-called yield curve. When it’s “inverted,” as it has been since about mid-2022, that almost always means a recession is looming.

But by mid-2023, the curve began to “disinvert” – or steepen in industry parlance — in a way that raised the question of whether the U.S. had managed to dodge a recession or whether one was about to start.