S&P 500, Nasdaq close lower as traders cash in on latest megacap rally

The S&P 500 and Nasdaq closed in negative territory on Wednesday as investors took profits after a months-long megacap stocks run and ahead of key economic and policy events next week.

The small-cap index Russell 2000 climbed 1.78% as investors kept moving away from megagap and growth stocks after their strong gains.

“Over the past week, we’ve seen a pretty dramatic outperformance of small caps relative to large caps,” said Paul Baiocchi, investment firm SS&C ALPS Advisors chief ETF strategist. “We’re seeing that persist here today.”

U.S. inflation data is expected to show consumer prices eased slightly in May from the previous month but with elevated core prices.

Weighing on stocks, the two-year U.S. Treasury yield and benchmark 10-year yield increased after the Bank of Canada raised interest rates, adding to investor jitters about the Federal Reserve’s next U.S. interest rate decision.

Money market participants now see a 69% chance that the U.S. central bank will skip raising interest rates in its June meeting but will hike in July, down from nearly 77% earlier, according to the CME’s Fedwatch tool.

Recently, U.S. shares have been boosted by a megacap stocks rally and a stronger-than-expected earnings season, with the S&P 500 up almost 20% from its October 2022 lows.

Some analysts expect profit-taking soon in big tech and other major growth stocks.

Meanwhile, CBOE Volatility Index hit the lowest close since Feb. 14, 2020.

Wells Fargo raised the price target on Netflix shares to $500 from $400, the highest on Wall Street, according to Refinitiv. The streaming company ticked 0.12% higher on the news.

Energy index rose 2.65% after oil prices edged higher, while the KBW Regional Banking Index closed at the highest level since March 29.

The Dow Jones Industrial Average rose 91.74 points, or 0.27%, to 33,665.02, the S&P 500 lost 16.33 points, or 0.38%, to 4,267.52 and the Nasdaq Composite dropped 171.52 points, or 1.29%, to 13,104.90.

Yext Inc soared 38.44% after the New York-based online marketing firm raised its annual earnings forecast.

Campbell Soup fell 8.91% after the packaged food maker posted a lower fiscal third-quarter gross margin, dented by high commodity and freight costs.

Coinbase shares advanced 3.20% the day after they hit a seven-month low, as the company’s CEO

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reassured customers that their funds were safe and blasted the U.S. Securities and Exchange Commission over its lawsuit. On Tuesday, the SEC sued the largest U.S. crypto exchange, accusing it of operating illegally, without having first registered with regulator.

Cathie Wood’s Ark Invest bought 419,324 shares of Coinbase on Tuesday.

Advancing issues outnumbered declining ones on the NYSE by a 1.58-to-1 ratio; on Nasdaq, a 1.27-to-1 ratio favored advancers.

The S&P 500 posted 22 new 52-week highs and no new lows; the Nasdaq Composite recorded 122 new highs and 40 new lows.

Following their comment, fed funds futures have factored in a 70% chance the Fed will keep rates unchanged next month, up sharply from a 30% probability earlier in the wake of data showing an increase in U.S. job openings.

The Labor Department reported on Wednesday that U.S. job openings unexpectedly rose in April and data for the prior month was revised higher, pointing to persistent strength in the labor market.

The Job Openings and Labor Turnover Survey, or JOLTS report, also showed layoffs declined significantly last month.

By ANDREW E. KRAMER, PAUL SONNE and VICTORIA KIM

Hundreds of exhausted people, some carrying only backpacks, escaped inundated villages Wednesday as a rescue effort pressed ahead across southern Ukraine, a day after the destruction of the Kakhovka dam gave rise to another humanitarian disaster along the front lines of the 15-month war.

Floodwaters engulfed streets and homes, sent residents fleeing on boats and dislodged roofs across dozens of communities on both sides of the Dnieper River, which divides the warring armies in much of southern Ukraine. A total of about 3,000 people had been evacuated in Russian- and Ukrainian-controlled areas, according to officials on both sides — a fraction of the roughly 41,000 residents whom Ukrainian officials have said are at risk.

There were still no confirmed reports of deaths, and the scale of the disaster, which drained a giant reservoir used for drinking water and irrigation, was only beginning to come into focus. President Volodymyr Zelenskyy of Ukraine said that hundreds of thousands of people were “without normal access to drinking water” and that the emergency services were working to rush potable water to Ukrainian-controlled areas.

Even as officials said floodwaters were receding in areas closest to the dam, its destruction has spread further misery on both sides of the Dnieper.

In the Ukrainian-held city of Kherson on the west bank, rescuers completely evacuated a neighborhood submerged in fetid floodwaters, venturing out in boats to pull people from roofs and the upper floors of homes. Information about areas in the Russian-occupied east bank was difficult to obtain, but state television broadcast images of inundated villages and Russian-appointed officials said about 1,500 people had been evacuated.

Experts said a deliberate explosion inside the dam, which has been under Russian control since early in the war, most likely caused the massive structure of steel-reinforced concrete to crumble. Zelenskyy said Russian forces had blown up the dam to “use the flood as a weapon,” while Russian officials blamed Ukrainian shelling for damaging the facility.

Ukraine’s agriculture ministry warned that the disaster would cut off water to hundreds of thousands of acres of farmland, turning some of the country’s most productive crop fields “into deserts as early as next year.”

The dam’s destruction could also risk diverting attention, resources and personnel from a long-planned Ukrainian counteroffensive that U.S. officials said may have begun this week. Flood-affected communities are calling for large amounts of fuel, water and vehicles — all components that are also essential for military operations — while national guard soldiers are helping with disaster relief.