Wall Street falls more than 1%; yields rise, investors assess earnings

US stock market: US stocks ended sharply lower on Wednesday, with the S&P 500 and Nasdaq falling more than 1 per cent each, as Treasury yields rose again and investors assessed the latest batch of quarterly corporate results and forecasts. Mounting tensions in the Middle East stoked risk aversion. Safe-haven gold hit its highest level in more than two months. The Cboe Volatility index (.VIX), Wall Street's fear gauge, jumped.

Yields edged higher after data showing US single-family homebuilding rebounded in September, supporting the view that the Federal Reserve will keep interest rates higher for longer. "We're in a period of sector rotation, and people are trying to figure out in this new environment - in a full reset of rates across the curve - what are the stocks that are going to continue to do well and what are the stocks that are going to suffer," said Rick Meckler, partner at Cherry Lane Investments, a family investment office in New Vernon, New Jersey.

"Obviously, companies that are highly leveraged have difficulties in this kind of a market." Higher yields from risk-free US Treasuries dull the appeal of stocks. On the earnings front, Procter & Gamble (PG.N) shares gained 2.6 per cent after its quarterly sales topped market expectations, while United Airlines Holdings (UAL.O) shares plunged 9.7 per cent after the company forecast weaker fourth-quarter profit due to higher costs. The S&P 500 passenger airlines index (.SPLRCALI) dropped 5.6 per cent.

The Dow Jones Industrial Average (.DJI) fell 332.57 points, or 0.98 per cent, to 33,665.08, the S&P 500 (.SPX) lost 58.6 points, or 1.34 per cent, to 4,314.6 and the Nasdaq Composite (.IXIC) dropped 219.45 points, or 1.62 per cent, to 13,314.30.

Investors have been worried about repercussions from the Israel-Hamas conflict that began Oct. 7 with a Hamas attack on Israeli civilians and soldiers. US President Joe Biden, during a lightning visit on Wednesday, pledged solidarity with Israel and said a deadly blast at a Gaza hospital seemed to have been caused by a rocket misfired by militants. Also in earnings news, Morgan Stanley's (MS.N) third-quarter profit showed a hit from lethargic dealmaking. Shares ended the day down 6.8 per cent.

After the closing bell, shares of Tesla (TSLA.O) were up about 2 per cent and Netflix (NFLX.O) jumped about 12 per cent after the companies reported quarterly results. Tesla ended the regular session down 4.8 per cent and Netflix ended the session down 2.7 per cent. More results are expected in the coming days as third-quarter US earnings season kicks into high gear.

Volume on US exchanges was 10.48 billion shares, compared with the 10.45 billion average for the full session over the last 20 trading days. Declining issues outnumbered advancing ones on the NYSE by a 4.67-to-1 ratio; on Nasdaq, a 3.33-to-1 ratio favored decliners. The S&P 500 posted 12 new 52-week highs and 25 new lows; the Nasdaq Composite recorded 25 new highs and 252 new lows.