US stocks tumble to sharp lower finish as abrupt sell-off snaps Wall St. rally

NEW YORK — US stocks closed lower on Wednesday after an abrupt midafternoon nosedive ended Wall Street’s impressive rally, which had been driven by falling interest rates and the US Federal Reserve’s dovish turn.

All three major US stock indexes veered lower late in the session to end 1.3% to 1.5% below Tuesday’s close.

Stocks were “near all time highs, they hit resistance,” said Jay Hatfield, portfolio manager at InfraCap in New York, noting the downturn was “surprisingly vociferous, things went from hot to cold real fast.”

FedEx shares tumbled 12.1% after the package delivery company missed quarterly profit estimates and cut its full-year revenue forecast as it battles United Parcel Service (UPS) in what is shaping up to be a weak holiday season. UPS dropped 2.9%.

Some traders said the market sell-off could have been aggravated by large purchases of near-term put options on the S&P 500, including put contracts that would guard against a drop below the 4,755 level on the index by the end of the session.

Put options convey the right to sell shares at a fixed price in the future and at times options-linked hedging activity can heighten volatility.

In extended trade, Micron Technology jumped 4.4% after the memory chipmaker forecast quarterly revenue above estimates.

During the session, the S&P 500 got within 0.5% of its all-time closing high. Reaching a new closing high would have confirmed the benchmark index had been in a bull market since closing at the bear market floor in October 2022.

The index is now more than 2% below its record closing high.

Financial markets were pricing in a 71.1% likelihood of that first cut arriving as soon as March, according to CME’s FedWatch tool.

On the economic front, bigger than expected jump in US consumer confidence and a surprise increase in existing home sales helped turn the major indexes green.

The Dow Jones Industrial Average fell 475.92 points or 1.27% to 37,082; the S&P 500 lost 70.02 points or 1.47% to 4,698.35; and the Nasdaq Composite dropped 225.28 points or 1.5% to 14,777.94.

All 11 major sectors in the S&P 500 closed in the red, with consumer staples suffering the steepest percentage decline after packaged food company General Mills cut its sales forecast.

Declining issues outnumbered advancing ones on the NYSE by a 2.64to-1 ratio; on Nasdaq, a 2.26-to-1 ratio favored decliners.

The S&P 500 posted 36 new 52-week highs and one new low; the Nasdaq Composite recorded 210 new highs and 89 new lows. —