On Thursday, stocks retreated slightly following the notable gains achieved in the preceding session. All the major indices declined, particularly with the Dow and the S&P 500 pulling back from Wednesday's record highs.
The Dow has reached a new low for today's session, losing 170.26 points or 0.4 percent, settling at 42,341.74. Similarly, the Nasdaq has decreased by 69.04 points or 0.4 percent, standing at 18,222.57, and the S&P 500 has declined by 20.07 points or 0.4 percent, positioning itself at 5,771.97.
The downturn in the stock markets follows the release of an eagerly awaited report from the Labor Department, which revealed that U.S. consumer prices increased more than anticipated in September. According to the report, the consumer price index rose by 0.2 percent, consistent with August's increase, although economists had predicted a slight increase of only 0.1 percent.
Moreover, the report indicated that core consumer prices, which exclude the volatile food and energy sectors, rose by 0.3 percent for the second consecutive month. Expectations had forecasted a 0.2 percent rise. On an annual basis, consumer price growth slowed to 2.4 percent in September from 2.5 percent in August, although the anticipated slowdown was to 2.3 percent. Conversely, the annual growth rate of core consumer prices increased to 3.3 percent from 3.2 percent, defying expectations for stability.
The larger-than-anticipated rise in consumer prices dampens hope that the Federal Reserve will aggressively cut interest rates in the upcoming months. CME Group's FedWatch Tool currently suggests an 88.4 percent probability of a 25 basis point rate cut next month, following a 50 basis point reduction in the previous month.
"Disinflation continues, but it's mistaken to believe the Fed will reduce rates by another 0.50 basis points in November," stated Jamie Cox, Managing Partner at Harris Financial Group. "When interest rates don't hinder growth, they can’t completely curb inflation either," he remarked. "The Fed will cut rates, but at a measured pace from here."
Negative sentiment has further been fueled by another Labor Department report showing a significant rise in first-time U.S. unemployment benefit claims for the week ending October 5th. Initial jobless claims jumped to 258,000, an increase of 33,000 from the preceding week's unchanged level of 225,000, whereas economists had expected a rise to 230,000. This spike brings claims to their highest point since reaching a similar figure in the week ending August 5th, 2023.
Sector Analysis
Telecom stocks experienced a notable decline, causing the NYSE Arca North American Telecom Index to drop by 1.4 percent to its lowest intraday level in nearly a month. Weakness is also apparent in the computer hardware sector, with the NYSE Arca Computer Hardware Index posting a 1.2 percent loss. Housing and networking stocks are under pressure as well, although gold stocks have risen alongside higher precious metal prices.
Global Markets
In international trading, stock markets across the Asia-Pacific region mostly trended upwards on Thursday. Japan's Nikkei 225 Index increased by 0.3 percent, China's Shanghai Composite Index rose by 1.3 percent, and Hong Kong's Hang Seng Index surged by 3.0 percent. Conversely, European markets have mostly faced declines today, with the U.K.'s FTSE 100 Index marginally below the unchanged mark, while both the French CAC 40 Index and the German DAX Index have decreased by 0.4 percent.
Meanwhile, in the bond market, Treasury yields extended their recent downward trend in response to the latest inflation data. Consequently, the yield on the benchmark ten-year note, which moves inversely to its price, has increased by 3.1 basis points, now standing at 4.098 percent.
