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Wall Street’s main indexes reeled in the red on Thursday, after a more positive-than-expected producer price inflation report added to concerns that the Federal Reserve may have to continue raising rates. Investors also scrutinized various other jobless economic data points. claims and housing data to business outlook numbers.
The high-tech Nasdaq Composite (COMP.IND) decreased 0.61% to 11,996.71 points in morning trading. The Benchmark S&P 500 Index (SP500) shed 0.67% to 4,119.66 points, while the blue-chip Dow (DJI) was lower by 0.73% to 33,877.85 points.
All 11 S&P sectors were trading in the red, with rate-sensitive sectors, utilities and real estate, falling the most.
All three major averages have been experiencing volatile trading sessions over the past two days, with economic data being the main trigger. A higher-than-expected jump in the January consumer price index on Tuesday, coupled with an increase in retail sales for the month on Wednesday, have led to speculation about future interest rate hikes and even where the Fed would be willing to raise rates to combat inflationary pressures.
“So is it good news, good news or bad news? Is it bad news, bad news or good news? Are rising rates and yields a sign of normality or impending trouble again? US inflation? , hard or no landing more likely now after what we have seen so far this year? Are the seasons also wreaking havoc on the data? December US data was particularly weak and January data particularly weak These are the trillion-dollar questions right now, said Jim Reid of Deutsche Bank.
“At first glance, there is mounting evidence of the strength of the US economy, with the latest round of data releases still painting a very strong picture at the start of the year. This has helped cement the market narrative. of the last two years.” weeks, causing investors to reevaluate how much the Fed will need to raise rates to control inflation,” Reid added.
Data on Thursday showed the January Producer Price Index rose 0.7% m/m, the highest since June last year and higher than expected +0.4%.
The economic calendar also had housing data in the form of housing starts and permits for January. Home starts came in at 1.309 million, compared to a consensus of 1.36 million, while building permits came in at 1.339 million versus a projected 1.35 million.
Additionally, the number of Americans filing initial jobless claims unexpectedly dropped to 194K, less than the anticipated figure of 200K.
Additionally, the Philadelphia Fed Business Outlook for February was -24.3 versus the consensus of -7.4.
“Neither the labor market nor inflation are necessarily behaving as equity markets would like; neither are cooling fast enough. The deep curve inversion, coupled with high real short rates in the US. , will ultimately divide credit conditions between the haves and have-nots. This cycle is looking more and more like the tech bubble of 2000-02,” Jefferies said in a note to investors.
Market participants will also be watching for the latest round of speakers from the Fed on Thursday. Earlier, Cleveland Fed President Loretta Mester, in prepared remarks at an event in Florida, said she saw a “compelling case” for a 50 basis point hike at the central bank’s policy meeting two weeks ago. Mester will speak again later this afternoon at a CME Group event. St. Louis Fed President James Bullard is also available to speak at a Jackson House event.
As for the fixed income markets, yields rose. The 10-year Treasury yield (US10Y) rose 3 basis points to 3.84%, while the 2-year yield (US2Y) rose 1 basis point to 4.64%.
Among active stocks, the Organon (OGN) spin-off of Merck (MRK) slumped and was the top percentage loser in the S&P 500 (SP500) after its quarterly results missed estimates. By contrast, West Pharmaceutical (WST) was S&P’s top percentage gainer after reporting better-than-expected results and a $1B share buyback program.
Cisco (CSCO) rose and was the only percentage gainer among the Dow 30 components. The networking giant issued solid quarterly earnings and guidance.
Streaming company Roku (ROKU) soared as investors applauded its results and outlook.
