US stocks finished lower on Wednesday, led by a drop in the Nasdaq, with technology shares declining as investors moved into more defensive areas, while bank stocks extended recent losses following some mixed quarterly results.
The S&P 500 bank index dropped, with shares of Wells Fargo down 4.6 per cent after the company missed fourth-quarter profit expectations.
Citigroup and Bank of America shares also fell, even after the companies beat Wall Street estimates for fourth-quarter profit.
Financials including the banks, which were up sharply in 2025, have fallen this week amid concerns over US President Donald Trump's proposed cap on credit-card interest rates, which JPMorgan executives warned 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 in Stamford, Connecticut.
"Generally speaking, people are still optimistic on the group."
In addition, he said, the credit-card cap plan may never go forward, but "none of the bank executives could rule it out."
In tech, he said, investors are looking to rotate out of expensive megacaps and into value and more defensive names.
S&P 500 financials fell along with the S&P 500 technology sector while more defensive groups including consumer staples rose. The small-cap Russell 2000 index, which has been sharply outperforming the benchmark S&P 500 so far this year, hit a record closing high, along with the S&P 500 industrials index.
The Dow Jones Industrial Average fell 42.36 points, or 0.09 per cent, to 49,149.63, the S&P 500 lost 37.14 points, or 0.53 per cent, to 6,926.60 and the Nasdaq Composite lost 238.12 points, or 1.00 per cent, to 23,471.75.
Shares of Broadcom and Fortinet dropped after Reuters reported, citing three people briefed on the matter, that Chinese authorities have told domestic companies to stop using cybersecurity software made by more than a dozen firms from the US and Israel.
On the flip side, energy shares rose, with oil prices settling higher amid worries about Iranian supply disruptions. Oil eased later in the day.
Investors also digested data earlier on Wednesday showing producer prices in the US matched forecasts in November but that retail sales topped expectations. A report on Tuesday showed December consumer prices rose as projected.
Interest rates are widely expected to hold steady through the first half of the year, including at the Federal Reserve's January meeting, with traders pricing in at least two cuts before year-end, according to LSEG data.
Volume on US exchanges was 22.54 billion shares, compared with the 16.69 billion average for the full session over the last 20 trading days. Advancing issues outnumbered decliners by a 1.85-to-1 ratio on the NYSE.
There were 518 new highs and 69 new lows on the NYSE. On the Nasdaq, 2,739 stocks rose and 2,034 fell as advancing issues outnumbered decliners by a 1.35-to-1 ratio.
