Markets Reverse Early Gains and End Lower

U.S. equities gave up early gains and finished lower on indications that the Fed may need to raise interest rates more than expected in order to fight inflation. The market also weighed mixed results from the latest batch of corporate earnings.

The selloff accelerated in the last hour of trading. The Dow had a more than 600-point swing during the session and lost 0.7%. The S&P 500 and Nasdaq dipped 0.9% and 1%, respectively. Bond yields also reversed course, with the yield on the 10-year Treasury note advancing.

Shares plunged for several companies that posted worse-than-expected quarterly results. International Flavors & Fragrances (IFF) was the worst-performing stock in the S&P 500 on declining sales and as an analyst lowered the target price. Mattel (MAT) shares tumbled as the maker of Barbie dolls and Hot Wheels cars had a decline in sales during the holiday quarter, and its 2023 profit forecast missed estimates. Shares of Affirm Holdings (AFRM) cratered after its earnings and revenue came up short of forecasts, and it said it would lay off 19% of its workforce. Baxter International (BAX) also announced that it was cutting jobs, and its earnings and guidance were less than anticipated. Shares sank on the news.

The unenthusiastic response to Google’s new artificial intelligence (AI) chatbot sent shares of parent Alphabet (GOOGL) lower for a second straight day. Lucid Group (LCID) shares dropped as the luxury electric carmaker offered a $7,500 discount on some of its sedans.

Salesforce Stake

Most of the stocks in the Dow declined. Shares of The Walt Disney Company (DIS) began the day up after the entertainment giant’s solid quarterly results and cost-cutting plan, as well as activist investor Nelson Peltz ending his proxy fight with the company. However, like the major averages, Disney stock turned around and ended in the red. Salesforce (CRM) was one of the few bright spots in the Dow as its shares gained on the news activist investor Dan Loeb’s Third Point LLC has taken a stake in the cloud-based software company.

Strong earnings from MGM Resorts International (MGM) and Wynn Resorts (WYNN) sent shares of both casino operators higher. O’Reilly Automotive (ORLY) shares surged as the auto parts retailer posted record sales. Shares of rivals advanced as well. The rally in Tesla (TSLA) continued, with shares recording their eighth consecutive day of gains.

Oil and gold futures lost 1%. The U.S. dollar declined against the euro and pound but rose against the yen. Prices for major cryptocurrencies dropped.