The tech-heavy Nasdaq closed down on Wednesday, weighed by streaming giant Netflix's surprise drop in subscribers which shook investor confidence in other high-growth companies, fearful they may face similar post-pandemic performance issues.
By contrast, the blue-chip Dow was driven to a higher close by positive earnings from consumer giant Procter & Gamble (PG) and IT firm IBM Corp. (IBM).
Netflix Inc.(NFLX) plunged after it blamed inflation, the Ukraine war and fierce competition for the subscriber decline and predicted deeper losses ahead.
The ripple effects were felt both by financial technology names and companies whose fortunes were seen to have been boosted by pandemic trends such as lockdown measures.
Streaming peers Walt Disney, Roku and Warner Bros Discovery all dropped, as did stay-at-home darlings Zoom Video Communications, Doordash and Peloton Interactive
Suffering financials included PayPal Holdings Inc, Block Inc, Marqeta Inc and SoFi Technologies Inc .
"Once profits move so far, it becomes harder to get that next little bit of growth, and it's harder to obtain it in the late cycle," said Jason Pride, chief investment officer of private wealth at Glenmede.
"I think the market is beginning to comprehend that, and will need to comprehend that as we go through the year."
Market-leading technology and growth stocks have struggled this year as investors worry that rising interest rates will dent their future earnings.
The communication services sector declined on Wednesday, although a majority of the 11 major S&P 500 sectors gained, led by the real estate index and consumer staples.
Overall, the earnings season has started on a strong note. Of the 60 companies in the S&P 500 index that have reported results so far, 80% exceeded profit expectations, as per Refinitiv data. Typically, 66% beat estimates.
Procter & Gamble gained after raising its annual sales view and IBM Corp jumped as it forecast hitting the top end of its 2022 revenue growth estimate.
According to preliminary data, the S&P 500 lost 2.26 points, or 0.05%, to end at 4,459.40 points, while the Nasdaq Composite lost 166.59 points, or 1.24%, to 13,453.07. The Dow Jones Industrial Average rose 250.78 points, or 0.72%, to 35,161.98.
The yield on 10-year Treasury note receded to 2.85% after a blistering rally that pushed it close to the key 3% level earlier in the session.
Meanwhile, the latest data points on the Federal Reserve's monetary policy tightening plans were released in the afternoon.
Its "Beige Book" showed the U.S. economy expanded at a moderate pace from February through early April, while San Francisco Federal Reserve President Mary Daly said she believes the case for a half-percentage-point interest rate hike next month is "complete."
United Airlines Holdings Inc gained ahead of its results due after the market close. The S&P 1500 Airlines index has risen for six of the past seven sessions, getting a boost from news that the Biden administration was dropping mask mandate on public transportation.
Tesla Inc fell ahead of its first-quarter results after the closing bell. Investors will keep an eye on whether the electric automaker maintains its ambitious 2022 delivery target as its biggest factory in Shanghai grapples with a COVID-19 shutdown and new plants slowly ramp up output.
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