Michelle ThompsonWall Street is declining on Thursday due to concerns that an overheated economy may force the Federal Reserve to maintain higher interest rates for longer.
In lunchtime trade, the S&P 500 was 0.5% lower and headed for its third straight loss. Particularly dismal were Big Tech firms, as the Nasdaq composite fell 1.1%. The Dow Jones Industrial Average, which places less of an emphasis on technology than the rest of the market, was performing better than the rest of the market and was up 28 points, or 0.1%, at 34,471 as of 11 a.m. Eastern time.
Bond yields increased earlier this week after a study revealed that U.S. services companies experienced stronger growth last month than economists had predicted, putting pressure on stocks. After a data on Thursday indicated that fewer U.S. employees than anticipated filed for unemployment benefits last week, yields remained high.
While such data are positive for the economy and show that a long-forecast recession is not imminent, they may also keep things humming along strongly enough to drive prices higher.
In an effort to slow the economy down enough to bring inflation back down to its objective of 2%, the Federal Reserve has already increased its key interest rate to its highest level in more than twenty years. It’s almost there, and inflation has decreased since last summer, when it peaked around 9%. However, there’s concern that the Fed may find it most difficult to achieve the final percentage point of improvement.
According to Mike Loewengart, head of model portfolio construction at Morgan Stanley Global Investment Office, “yes, the economy has slowed and inflation has cooled, but employment continues to be a thorn in the side of the Fed, which has made softening the jobs market the cornerstone of its inflation battle.”
All stock prices are lowered by high interest rates. However, they frequently damage the stocks of technology companies and other businesses the most because they were bid up on hopes for tremendous growth decades in the future. Due to their size, several of those stocks also frequently have the greatest impact on the S&P 500.
The most valuable stock, Apple, which is the dominant power on Wall Street, dropped 3.3% after falling 3.6% the day before.
Nvidia lost 2.7%, bringing its week-to-date loss to 5.6%. Its stock, along with a number of others in the artificial intelligence sector, had surged this year on anticipations that AI could lead to an enormous increase in revenues in the future.
As it spends more in chances involving generative AI, C3.ai’s stock fell 11.9% after it announced late on Wednesday that it no longer expects to be profitable in its final fiscal quarter of the year. Analysts also cited the company’s last quarter, which was the beginning of its fiscal year, as having poor profit margin levels.
Several Wall Street stocks were assisting in containing the losses even while the majority were declining.
Manufacturer of containerboard and other packaging WestRock had a 4.9% increase when Smurfit Kappa Group declared that it was in talks to merge the two businesses while keeping its headquarters in Dublin, Ireland.
The two-year Treasury yield in the bond market decreased from 5.03% late on Wednesday to 4.99%. It’s still significantly higher than the 4.88% mark from before the week began. The yield on the two-year Treasury seems to correspond to predictions for the Fed.
At its upcoming meeting later this month, most traders still anticipate the Fed to leave interest rates unchanged. However, according to data from CME Group, they are betting on a likelihood of another gain before the end of the year that is almost coin toss.
The key bond in the bond market, the 10-year Treasury, which influences mortgage and other major lending rates, saw a decrease in yield late on Wednesday, dropping from 4.30% to 4.28%.
Following the most recent batch of depressing information on the second-largest economy in the world, indexes in foreign stock markets plummeted in China. Stocks in Shanghai lost 1.1% and Hong Kong’s Hang Seng declined 1.3% as a result of news that China’s exports fell for the fourth consecutive month relative to levels from a year earlier.
Since it repealed the anti-COVID measures, its economic recovery has fallen far short of forecasts. That took away a significant source of growth for the global economy, but it also relieved some pressure on global inflation.
Stock indexes in Europe were fluctuating but just little.
