Key points of the day:
- Cisco surged due to strong quarterly results.
- CVS shares dropped after Blue Shield of California's decision to change its business relationship.
- Pfizer's stocks rose following reports of a new COVID-19 drug development.
- Positive statistics: Unemployment claims dropped faster than predicted.
- Major index declines: Dow by 0.84%, S&P 500 by 0.77%, Nasdaq by 1.07%.
Wall Street trading ended on Thursday with a decrease in major indices. The decline of healthcare companies' stocks exerted significant pressure on the market, overshadowing the positive performance of tech sector stocks like Cisco and the energy sector. Amid favorable economic data, investors' concerns about the potential persistence of high-interest rates intensified.
One of the day's main events was the 8% decline in CVS Health shares. This occurred after the intention of Blue Shield of California to review its business relations with the company, specifically as a pharmacy benefits manager, became public. It was also reported that the company is considering partnerships with other partners, including Amazon.com.
In addition to CVS, shares of other health insurance companies like UnitedHealth and Cigna also fell, leading to an overall deterioration of the healthcare sector's performance in the S&P 500 index.
At the end of the day, the S&P 500 lost 2.7% over the past three sessions — the biggest three-day drop since March. And the Nasdaq index showed a decline of 3.4% over three days, marking its most significant fall since February of this year.
The Dow Jones Industrial Average fell by 290.91 points, or 0.84%, closing at 34,474.83 points. The rise in oil prices acted as a catalyst for the growth of Exxon Mobil and Chevron stocks, which rose by 1.9% and 1.7% respectively. This was spurred by expectations that the Chinese central bank would actively support its economy and real estate market.
However, the yield of 10-year US Treasury bonds reached its highest level since October, sparking fears that the Federal Reserve may maintain high-interest rates in light of recent positive economic indicators. Jeffrey Buchbinder of LPL Financial expressed the view that the stock market may be volatile in the short term due to this uncertainty.
According to the Department of Labor, unemployment claims decreased, pointing to ongoing tensions in the job market. The minutes from the Federal Reserve's July meeting emphasized battling inflation, amplifying uncertainty regarding future interest rate direction.
Fresh data suggests that the Federal Reserve is likely to maintain current interest rates. However, the probability of such a decision has slightly decreased, now standing at 86.5%, compared to 89% last week, as indicated in the CME Group's Fedwatch tool.
Against this backdrop, Cisco Systems shares increased by 3.3%, thanks to better-than-expected quarterly results and comments from the CEO about the potential of artificial intelligence. Pfizer shares also rose, gaining 2.9%. This was prompted by news that their updated COVID-19 vaccine successfully underwent testing against the new "Eris" variant in mice.
Biotechnology companies' stocks, such as Moderna and Novavax, saw significant growth, possibly linked to an increase in COVID-19 hospitalizations in the US. According to the latest data, the number of virus-related hospitalizations has increased by more than 40% since June.
However, despite positive news from the medical industry, retail traders felt the pressure. For instance, Walmart, the largest retailer, despite surpassing second-quarter sales estimates and raising its annual forecast, still saw a 2.2% drop in stock value.
On the S&P 500 stock market, stocks that decreased in price outnumbered those that grew, with a ratio of 2.7 to 1. The index recorded two new all-time highs and 17 lows, while the Nasdaq showed 25 new highs and 252 lows.
The trading volume in the US was comparable to the average, amounting to 11.2 billion shares, slightly exceeding the average volume of 11.0 billion shares over the last 20 trading days.
While the CBOE volatility index, based on S&P 500 options trading indicators, increased, gold futures declined. Oil prices, including WTI and Brent, showed growth.
On the foreign exchange market, the EUR/USD pair remained virtually unchanged, and the USD/JPY fell. Futures on the dollar index remained stable at 103.32.
Overall, US markets exhibited mixed dynamics, with growth in some sectors and declines in others, reflecting the complex interplay between economic, financial, and geopolitical risks.
