US close: Stocks slump again as uncertainty weighs on sentiment

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US stocks fell for the third day on Wednesday, dropping sharply as investors continued to take profits following recent highs, with shares of Tesla falling ahead of the carmaker's results due out after the closing bell.

Fast food giant and economic bellwether McDonald's saw heavy losses on news of a deadly e.coli outbreak, heavyweight aerospace group Boeing slumped after its worst quarterly loss in years, while a number of tech blue chips were also out of favour.

With just four of its 30 constituents trading in positive territory, the Dow Jones Industrial Average closed 1% lower at 42,514.95. Meanwhile, the S&P 500 fell 0.9% to 5,797.42, finishing below the 5,800 mark for the first time in two weeks, while the Nasdaq dropped 1.6% to 18,276.65.

The only major economic data of the day were US existing home sales figures for September, which showed a 1% fall from the previous month to 3.84m. This was the lowest level since October 2010 and worse than the 0.5% decline expected by economists.

Meanwhile, analysts said market sentiment was being dampened by uncertainty surrounding the upcoming elections, with the latest polls showing that former president Donald Trump is leading in the majority of swing states.

Amid the uncertainty, the Federal Reserve's Beige Book released during Wednesday's session showed that nine out of 12 districts reported flat or declining economic activity, reinforcing expectations of a rate cut at the Fed's next meeting in the first week of November.

Chris Beauchamp, chief market analyst at IG, said that the number of upcoming big macro events could be weighing heavily on investors minds.

"Even without thinking about the US election, which is impossible to ignore, the upcoming payrolls report and Fed decision in coming weeks provide two additional hurdles to navigate. While volatility hasn’t exactly spiked, it still feels like there is a nasty surprise lurking just around the corner," he said.

In other news, the Bank of Canada slashed its benchmark interest rate by 50 basis points to 3.75%, as expected, marking the fourth straight cut. Governor Tiff Macklem said to expect further monetary easing, but acknowledged that inflation was back to the 2% target.

Market movers

McDonald's dropped 5% after the US Centers for Disease Control and Prevention linked its Quarter Pounders to a fatal E.coli outbreak, which is likely to impact consumer confidence and the company’s outlook.

Tesla shares finished down 2% ahead of the electric carmaker's results out after the close. “We will be watching to see if Elon Musk can sell a more convincing story about Tesla’s future plans for growth compared to previous earnings reports," said XTB research director Kathleen Brooks.

Boeing was 2% lower after reporting a significant widening of its third-quarter losses, after being hit by work stoppages and programme charges. The aerospace giant posted a net loss of $7.95bn, compared with a loss of $2.2 million in the same period last year.

Coca-Cola shed 2% despite its reporting that full-year organic sales were set to be at the high end of its previous guidance range. In its third-quarter results, the drinks company said net revenue dipped 1% to $11.9bn, but this was ahead of consensus expectations of $11.6bn.

Tech giants Amazon.com, Nvidia and Apple were all among the worst performers on Wall Street, dragging the wider sector lower.

Meanwhile, telecoms group AT&T was a rare bright spark after reporting third-quarter earnings ahead of analysts' forecasts and reiterating its annual guidance.

Dow Jones - Risers

Verizon Communications Inc. (VZ) $42.86 3.28%
Walmart Inc. (WMT) $83.27 1.52%
Johnson & Johnson (JNJ) $165.86 1.47%
International Business Machines Corporation (CDI) (IBM) $232.75 0.22%