Market Retreats as Fed’s Hawkish Tone Alters Outlook
The S&P 500 Index ($SPX) (SPY) closed down -0.60% on Thursday, the Dow Jones Industrials Index ($DOWI) (DIA) fell -0.47%, and the Nasdaq 100 Index ($IUXX) (QQQ) decreased by -0.66%.
Stocks Dip After Fed Signals Caution on Rate Cuts
On Thursday, stock markets pulled back, resulting in the S&P 500, Dow Jones Industrials, and Nasdaq 100 hitting one-week lows. The downturn followed hawkish remarks from Fed Chair Powell, who indicated that the probability of a rate cut next month had decreased from 82% to 59%. He emphasized that the US economy is strong enough that there is no rush to cut interest rates. This sentiment came as investors reacted to positive economic reports, suggesting that the Fed may hold off on aggressive rate cuts.
Economic Indicators Signaling Strength
Adding to market pressures, the yield on the 10-year T-note climbed to a 4.5-month high after initial unemployment claims dropped unexpectedly to a 5.5-month low of 217,000, showing a stronger labor market than the anticipated 220,000. The October producer price index also rose by +2.4% year-over-year, surpassing forecasts of +2.3%.
Corporate Highlights Offer Some Hope
Despite the overall market decline, some companies reported positive results. Walt Disney’s stock surged over +6% after exceeding fourth-quarter adjusted earnings per share (EPS) estimates and boosting its EPS growth forecast for fiscal 2025. Airline stocks also saw gains amid Barclays’ optimistic outlook on the sector’s fundamentals, suggesting a potential rally in the coming year.
Looking Ahead: Retail Sales and Earnings Reports
Investors are eager to review Friday’s retail sales report, which is expected to show a +0.3% increase month-over-month. Additionally, with more than 50 companies scheduled to release their quarterly results, the third-quarter earnings season is nearing its close. So far, 85% of S&P 500 firms that have reported results have beaten expectations, averaging a +8.4% year-over-year increase in earnings, a significant jump from earlier predictions.
Global Markets Show Mixed Performance
International markets displayed mixed results on Thursday. The Euro Stoxx 50 gained +1.97%, while China’s Shanghai Composite Index dropped -1.73%. Japan’s Nikkei 225 fell as well, closing down -0.48%.
Interest Rates Remain a Hot Topic
December 10-year T-notes (ZNZ24) closed up +4 ticks, while the yield on the 10-year T-note fell slightly to 4.449%. T-notes experienced initial gains but lost traction later in the day after Powell’s comments about the Fed’s approach to interest rates. Meanwhile, European bond yields declined; the 10-year German bund dropped -4.9 basis points to 2.341%.
US Stock Movers: Mixed Results Amid Pressure
Stocks related to government contracts faced significant downturns after President-elect Trump announced plans for a spending cut commission. Leidos Holdings (LDOS) led the decline with a drop of over -13%. Super Micro Computer (SMCI) fell by more than -11% due to prolonged delays in filing quarterly reports.
On a brighter note, companies like Beazer Homes USA (BZH) and Wynn Resorts Ltd (WYNN) saw their stocks rise by more than +8%, thanks to stronger-than-expected financial results.
Upcoming Earnings Reports
On November 15, various companies, including Actinium Pharmaceuticals Inc (ATNM) and Compass Minerals International (CMP), are set to announce their earnings.
On the date of publication, Rich Asplund did not hold (either directly or indirectly) positions in any securities mentioned. All information in this article is for informational purposes only. For more information, please view the Barchart Disclosure Policy here.
The views expressed in this article are those of the author and do not necessarily reflect those of Nasdaq, Inc.
