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.

U.S. stocks ended lower on Tuesday as financial shares led the market decline, driven by growing concerns over President Donald Trump's proposed 10% cap on credit card interest rates. The proposal, announced last Friday, has sparked significant selling pressure in the financial sector throughout the week.

Major Index Performance

The three major U.S. indices all closed in negative territory, with the Dow Jones Industrial Average bearing the brunt of the decline.

The decline came despite both the Dow and S&P 500 registering record closing highs on Monday, with analysts suggesting the pullback reflects "a little bit of letting the air out of the balloon" after recent gains.

Financial Sector Under Pressure

Financial stocks bore the heaviest impact from Trump's credit card rate cap proposal, with the sector falling 1.8% and leading declines in the S&P 500. JPMorgan executives, including CEO Jamie Dimon, warned that the proposed rate cap would severely hurt both financial companies' profits and consumers.

"Financials are getting hit by Trump's credit-card proposal," said Tim Ghriskey, senior portfolio strategist at Ingalls & Snyder in New York. "It seems to be sinking in. I think it's going to be extremely difficult to have that become a reality, but it's still out there."

Earnings Season Begins

Tuesday's results from JPMorgan and other companies unofficially kicked off the fourth-quarter U.S. earnings season. Despite the current market concerns, analysts expect most banks to post stronger results for the last quarter of 2025, with other major banks scheduled to report later this week.

Delta Air Lines shares declined 2.4% as the midpoint of its 2026 profit forecast fell short of analysts' expectations. However, overall earnings news for the reporting period is expected to be positive, with potential upward revisions for 2026.

Market Breadth and Trading Activity

Despite the headline index declines, market breadth showed mixed signals. Advancing issues outnumbered decliners by a 1.15-to-1 ratio on the NYSE, with 577 new highs versus 77 new lows. However, on the Nasdaq, declining issues outnumbered advancers by a 1.31-to-1 ratio, with 2,068 stocks rising and 2,701 falling.

Trading volume reached 18.68 billion shares on U.S. exchanges, exceeding the roughly 16.40 billion average for the full session over the last 20 trading days. The elevated volume suggests heightened investor activity amid the financial sector concerns and earnings season kickoff.