US benchmark indices experienced heightened volatility as investors continued their rotation away from technology stocks toward economically sensitive and smallcap equities. The session highlighted ongoing market dynamics favoring value-oriented investments over growth stocks.

Market Performance Overview

The major indices showed mixed performance with notable intraday volatility:

Despite the negative performance of major indices, market breadth remained positive with 300 stocks on the S&P 500 ending higher, indicating underlying strength in individual equities.

Smallcap Stocks Continue Historic Run

Smallcap stocks extended their remarkable outperformance, with the Russell 2000 index surpassing the S&P 500 for the ninth consecutive session. This winning streak represents the longest such period since 1990, highlighting the significant rotation occurring in equity markets.

Banking Sector Earnings Disappoint

Major banking institutions reported mixed quarterly results that failed to meet investor expectations:

Matt Maley at Miller Tabak commented on the earnings environment: "Expectations for this earnings season are very high. If those expectations are not met in today's stock market — which is priced for perfection — it's going to create some headwinds."

Economic Data and Commodities

Economic indicators showed mixed signals with retail sales for November rising by the most since July, driven by auto purchases and resilient holiday shopping. Wholesale inflation increased slightly while services prices remained unchanged.

Commodity markets showed strength across precious metals and energy:

Upcoming Earnings Calendar

The earnings season continues with several major financial institutions and corporations scheduled to report, including Morgan Stanley, Goldman Sachs, TSMC, and BlackRock. These results will provide further insight into corporate performance and market direction.

US stock markets closed lower on Wednesday, marking the second consecutive session of losses as technology shares declined and bank stocks extended recent losses following mixed quarterly results. Investors rotated into more defensive sectors amid concerns over proposed financial regulations and profit-taking in expensive technology names.

Market Performance Overview

All three major US indices finished in negative territory, with the technology-heavy Nasdaq leading the decline.

The Nasdaq's 1.00% decline represented the steepest fall among the three indices, reflecting continued pressure on technology stocks. Trading volume reached 22.54 billion shares, significantly above the 20-day average of 16.69 billion shares.

Banking Sector Under Pressure

The S&P 500 bank index dropped sharply as several major financial institutions posted mixed quarterly results and faced regulatory concerns.

Despite some banks beating Wall Street estimates, the sector faced headwinds from concerns over President Trump's proposed cap on credit-card interest rates. JPMorgan executives warned this could squeeze consumers and hurt financial sector profits. "After a nice run, and so-so or mediocre earnings, you're seeing profit-taking and consolidation" in the banks, said Michael O'Rourke, chief market strategist at JonesTrading.

Technology Sector Rotation

Technology stocks faced selling pressure as investors rotated out of expensive megacap names into value and defensive sectors. The S&P 500 technology sector declined alongside financials, while consumer staples rose. Shares of Broadcom and Fortinet dropped after reports that Chinese authorities told domestic companies to stop using cybersecurity software from over a dozen US and Israeli firms.

Market Breadth and Sector Performance

Despite the major indices' decline, market breadth remained positive with advancing issues outnumbering decliners. The small-cap Russell 2000 index hit a record closing high, along with the S&P 500 industrials index, demonstrating continued strength in certain market segments.

Energy shares provided a bright spot, rising alongside higher oil prices amid concerns about Iranian supply disruptions, though oil prices eased later in the session.

Economic Data and Fed Outlook

Investors digested economic data showing producer prices matched forecasts while retail sales topped expectations. Interest rates are widely expected to remain steady through the first half of the year, with traders pricing in at least two cuts before year-end according to LSEG data.