During Thursday's trading, stocks exhibited indecisiveness for much of the session but faced notable pressure in the latter part of the day. The major averages shifted convincingly into negative territory after fluctuating around the unchanged mark for most of the session.
As the day concluded, the major indices closed just above their session lows. Specifically, the Dow fell by 207.33 points, equating to a 0.5% decline, reaching 43,750.86. The Nasdaq decreased by 123.07 points or 0.6%, closing at 19,107.65, while the S&P 500 dropped 36.21 points or 0.6% to settle at 5,949.17.
The late-session downturn on Wall Street followed comments from Federal Reserve Chair Jerome Powell, who suggested that the central bank need not rush to reduce rates, considering the economy's current strength. Speaking at an event in Dallas, Texas, Powell remarked, "The economy is not sending any signals that we need to be in a hurry to lower rates. The strength we are currently seeing in the economy gives us the ability to approach our decisions carefully."
Powell characterized the U.S. economy's performance as "remarkably good," highlighting that while the labor market remains robust, it is no longer significantly contributing to inflationary pressures. He also noted the Fed's vigilance regarding risks that might impede its goals for employment and inflation. Powell cautioned that cutting rates too swiftly could hinder inflation progress, whereas a sluggish approach in reducing rates might unnecessarily dampen economic activity and jobs.
"Our policy is gradually shifting towards a more neutral stance, but there is no predetermined path to reach that goal," Powell stated. "Ultimately, the trajectory of policy rates will be guided by incoming data and the evolving economic outlook."
Powell's statements coincided with recently released U.S. economic data that added uncertainty around interest rate predictions. Earlier, the Labor Department reported an unexpected decrease in initial claims for unemployment benefits for the week ending November 9th. The report indicated a drop in initial jobless claims to 217,000, marking a 4,000 decline from the previous week's level of 221,000, contrary to economists' expectations of an increase to 223,000. This unexpected drop marked the lowest level since the week ending May 18th, when claims hit 216,000.
Additionally, following the previous day's consumer price inflation data meeting expectations, the Labor Department also unveiled that U.S. producer prices rose in October, aligning with economists' forecasts. Specifically, the producer price index for final demand rose by 0.2% in October, following a revised 0.1% increase in September. On an annual basis, producer prices accelerated 2.4% in October, up from 1.9% in September, slightly exceeding expectations of a rise to 2.3%.
The quicker-than-anticipated annual price growth, coupled with consistent labor market strength, has intensifying concerns surrounding the interest rate outlook.
While anticipation that the Federal Reserve will lower interest rates by a quarter point next month persists, there is rising apprehension that persistent inflation could prompt the Fed to slow its rate cut pace in early 2025.
Sector Overview:
Biotechnology stocks experienced a pronounced decline, causing the NYSE Arca Biotechnology Index to drop by 2.8%. Healthcare and pharmaceutical stocks also displayed noticeable weakness. The Dow Jones U.S. Health Care Index and the NYSE Arca Pharmaceutical Index fell by 1.6% and 1.5%, respectively.
Additionally, stocks in the networking, steel, and commercial real estate sectors exhibited declines, while airline stocks demonstrated substantial strength. The NYSE Arca Airline Index surged by 1.8%, recovering from a 7.3% drop on Wednesday.
Other Markets Perspective:
In overseas markets, stock exchanges in the Asia-Pacific region mostly dropped during Thursday's trading. Japan's Nikkei 225 Index declined by 0.5%, while China's Shanghai Composite Index fell by 1.7%, and Hong Kong's Hang Seng Index decreased by 2.0%.
Conversely, major European markets posted gains. The U.K.'s FTSE 100 Index advanced by 0.5%, while France's CAC 40 Index and Germany's DAX Index surged by 1.3% and 1.4%, respectively.In the bond market, treasuries experienced a recovery after dipping in the previous session. As a result, the yield on the benchmark ten-year note, which inversely relates to its price, decreased by 3.3 basis points to stand at 4.418 percent.
Looking Forward
Trading on Friday may be influenced by the latest U.S. economic data, with particular attention on reports concerning retail sales and industrial production.
