The Nasdaq Composite‘s Wednesday tumble put it on pace for its worst session since 2022.

The index lost nearly 3% in afternoon trading. If that holds through market close, Wednesday would mark the tech-heavy index’s worst day since December 15, 2022, when it lost 3.2%.

Despite that pullback, the index is still up nearly 20% in 2024.

— Alex Harring

The VanEck Semiconductor ETF (SMH) was poised to notch its biggest one-day decline since late 2022 on Wednesday.

The fund slipped around 5% in the session. If that holds through the closing bell, it would mark the ETF’s worst performance since Oct. 7, 2022, when shares tumbled close to 6%.

Shares of Elevance Health were trading 6% lower on Wednesday morning after the health insurer raised a red flag about elevated medical costs in Medicaid, despite the company beating its second-quarter estimates and reaffirming its guidance.

“As a result of redeterminations, our Medicaid membership mix has shifted, resulting in increased acuity and we are working actively with our state partners to ensure rates remain actuarially sound,” Elevance CEO Gail Boudreaux said in the firm’s second-quarter earnings call.

Medicaid players Centene and Molina Healthcare were also respectively trading 2.2% and 1.8% lower.

— Lisa Kailai Han, Bertha Coombs

The S&P 500 tech sector was down more than 3%, putting it on track for its biggest one-day drop since 2022. AMD, Lam Research all fell more than 7% to lead the sector lower. Nvidia fell more than 5%.

The recent rally in small- and mid-cap stocks have pushed the sector ETFs into overbought territory, according to Bespoke Investment Group.

Several ETFs, including the iShares Russell 2000 ETF (IWM), iShares Core S&P Small-Cap ETF (IJR) and the iShares Russell Mid-Cap ETF (IWR) are now trading more than three standard deviations above their 50-day moving averages, according to the firm.

Month to date, the benchmark small cap index Russell 2000 is trading 10.3% higher as optimism for interest rate cuts drives investors into previously neglected rate-sensitive areas of the market.

— Hakyung Kim

Five Below shares sank more than 16% during Wednesday’s session, putting the discount retailer on pace for its worst day since March 2020.

The slump in shares came as the company announced the departure of CEO Joel Anderson and cut its second-quarter earnings and revenue guidance. Several Wall Street firms also downgraded the stock, including Evercore ISI, Morgan Stanley and Barclays.

Shares of Five Below have plummeted more than 59% this year as it grapples with slowing sales.

Industrial production rose at a faster than expected pace in June, though it eased off its pace from the prior month.

Output increased 0.6% for the month, double the Dow Jones estimate though lower than the unrevised 0.9% gain in May, according to the Federal Reserve. For the quarter, production accelerated 4.3%, the highest since the fourth quarter of 2021.

Capacity utilization was at 78.8% on the month, up half a percentage point from May, better than the 78.5% forecast and the best since September 2023.

—Jeff Cox

Federal Reserve Governor Christopher Waller on Wednesday indicated the economy is nearing a point where interest rate cuts would be appropriate.

“While I don’t believe we have reached our final destination, I do believe we are getting closer to the time when a cut in the policy rate is warranted,” he said for a speech at a Kansas City Fed event.

Waller noted that the labor market is in a “sweet spot,” with job growth continuing while wage gains are easing. His comments were consistent with those of other policymakers recently that have fueled strong market belief that a rate reduction is coming not at the July Fed meeting but almost certainly in September.

—Jeff Cox

The three major indexes opened Wednesday’s session in the red.

The S&P 500 and Nasdaq Composite were each down by more than 1% shortly after 9:30 a.m. ET. The Dow shed just around 0.1%.

— Alex Harring

The nature of the recent 11.5% surge in small-cap stocks suggests it has more room to run, according to DataTrek Research.

“Similar returns have only come off major market lows, during bear market rallies, and after significant blips in longer run bull markets,” DataTrek co-founder Nicholas Colas wrote in his daily market note. “The current move matches none of those descriptions. Rather, it is a function of investors taking outsized Big Tech/large cap gains and shifting them to increase cyclical exposure. The scale of the Russell’s recent gains strongly suggests this reallocation is not yet over.”

With the Nasdaq down slightly over the past four trading days, it marks the biggest gap compared to small-cap returns going back to 1990, according to David Rosenberg, head of Rosenberg Research.

—Jeff Cox

Housing data in June for new construction came in better than expected, the Census Bureau reported Wednesday.

Starts totaled 1.353 million for the month, better than the 1.3 million Dow Jones estimate and up 3% from May. Building permits were at 1.446 million, topping the outlook for 1.4 million and beating May by 3.4%. Totals for both permits and starts were revised higher in May.

—Jeff Cox

Check out some of the companies making headlines in premarket trading:

• Chip stocks —Some of the largest semiconductor stocks were lower following a Bloomberg News report that said the Biden Administration is contemplating stiffer trade restrictions over concern that U.S. companies are giving China too much access to domestic semiconductor technology. Nvidia pulled back 4.4%, while Taiwan Semiconductor and AMD declined 4.7% and 4.1%, respectively. ASML, which sells semiconductor equipment for chipmakers, sank more than 8% on the news which overshadowed better-than-expected quarterly results. The VanEck Semiconductor ETF (SMH) was nearly 4% lower.
• Five Below — Shares of the discount retailer plummeted more than 15% after the company slashed its second-quarter outlook and announced the departure of CEO Joel Anderson. A slew of Wall Street firms including Evercore ISI, Morgan Stanley, Truist and Mizuho Securities all downgraded Five Below following the news.
• US Bancorp — The bank stock rose more than 1% after second-quarter earnings topped expectations. US Bancorp reported 97 cents in earnings per share, compared to a StreetAccount estimate of 94 cents per share, according to FactSet.

Read the full list here.

— Brian Evans

Gold miner stocks have advanced this week as the metal has climbed to new highs.

Gold touched a new intraday record of 2,487.4 on Wednesday. Despite trading lower in Wednesday’s premarket, the VanEck Gold Miners ETF (GDX) is up around 2.5% on the week, helped by rallies of at least 7% in Harmony Gold, DRDGold and SSR Mining.

The ETF has jumped more than 26% in 2024.

— Alex Harring, Gina Francolla

Small caps are poised to pull back on Wednesday after an epic five-day run. The iShares Russell 2000 ETF (IWM), which tracks the small cap benchmark, dipped 0.7% in premarket trading.

The Russell 2000 index had jumped five days in a row by more than 1%, only the fifth time since 1979 it it has ever done that, according to Bespoke Investment Group. During Tuesday’s session, the benchmark reached its highest level since January 2022.

Small caps took the baton from megacap technology shares last week to lead the bull market on hopes interest rate cuts will broaden out the economic recovery to their benefit.

The small-cap benchmark is up 12.8% over the last one month, triple the gains in the S&P 500.

Novo Nordisk and Eli Lilly shares dipped before the bell on Wednesday after Roche shared promising early stage trial data for its latest obesity drug candidate.

Shares of both Novo and Eli Lilly slipped more than 3% in the premarket. The former is known for the Wegovy drug, while the latter produces Zepbound.

In the first phase, Roche’s experimental, once-daily pill had a average weight loss of 6.1% within four weeks for obese patients without Type 2 diabetes and when adjusted for the placebo, the Swiss company said. The drug candidate came from its acquisition of Carmot Therapeutics, which was completed earlier this year.

— Alex Harring, Karen Gilchrist

Donald Trump will permit Federal Reserve Chair Jerome Powell to finish his term if elected in November, the Republican presidential candidate told Bloomberg Businessweek in an interview.

“I would let him serve it out, especially if I thought he was doing the right thing,” Trump told Bloomberg. Powell is serving a second four-year term as Fed chair, ending in early 2026.

Powell first became Fed chairman in 2018 and has been subject to criticism from then-President Trump over the years on interest rate policy.

As recently as February, Trump told Fox Business that he would not reappoint Powell to lead the Fed.

— Darla Mercado

Tuesday’s gains in small caps gave the Russell 2000 index the most overbought daily reading for any major U.S. index, according to Bespoke Investment Group.

“History was made today. The Russell 2000 closed 4.4 standard deviations above its 50-day moving average. No other major US index (Dow since 1900, S&P 500 since 1928, and Nasdaq since 1971) has ever closed at that much of an extreme,” the firm said in a post on X.

The Russell added 3.5% during Tuesday’s trading session, notching its fifth straight day of gains as investors piled into small caps in the hopes that interest rate cuts will improve the borrowing environment for those stocks.

— Pia Singh