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U.S. stocks faltered Thursday, weighed down by big drops in Cisco (CSCO) and Walmart (WMT) after their quarterly results. Meanwhile, Treasury yields fell as economic data continued to support a scenario of no more rate hikes by the country. Federal Reserve.
The blue-chip Dow (dji) led the losses among the three major Wall Street averages, down 0.43% to 34,841.54 points in midday operations. The tech-heavy Nasdaq Composite (IND COMP.) was down 0.28% to 14,064.60 points, while the benchmark S&P 500 index (SP500) fell 0.22% at 4,493.14 points. The indices have seen a massive rally since late October that has taken the S&P to near overbought levels.
“Overbought readings tend to trigger erroneous warning signals to the less initiated under the false pretense of symmetry: ‘If overbought is good, overbought must be bad.'” Reality check: SPX return distributions tend to smile and both OB/OS turn out to be bullish,” said Renaissance Macro on X (formerly Twitter).
Cisco (CSCO) plunged nearly 12% on Thursday and was the top percentage loser across the three major averages, after the networking giant’s forecasts disappointed investors. Walmart (WMT) fell more than 7% after the retail giant warned about consumer spending trends just ahead of the important holiday shopping season.
Palo Alto Networks (PANW) was also one of the top S&P and Nasdaq percentage losers, after the cybersecurity company lowered its full-year revenue outlook. In a bright spot, Macy’s (M) jumped 6% after delivering better quarterly margins and lower inventory.
Of the 11 S&P sectors, six were in positive territory, led by utilities.
Energy fell ~3% and was the biggest loser as WTI crude oil futures (CL1:COM) fell more than 4% amid rising inventories.
Market participants also had to deal with a busy economic calendar on Thursday. Before the opening bell, data showed that the number of Americans filing initial unemployment claims last week rose more than expected. At the same time, the Philadelphia Federal Reserve’s business outlook for November showed a continued overall decline in manufacturing activity in the region. Subsequently, a Kansas City Federal Reserve survey showed a further decline in regional factory activity in November.
In perhaps the most significant economic indicator of the day, US industrial production in October fell more than expected.
“Industrial production fell 0.6% in October, marking the largest monthly drop recorded so far this year. Added to this were the downward revisions to September data, which caused the initial reaction to “This report was pretty bleak. But the headline details exaggerating the recent weakness,” said Tim Quinlan of Wells Fargo.
“The slowdown can largely be attributed to the 10% drop in motor vehicle and parts manufacturing amid strikes at several automakers during the month of October,” Quinlan said.
The data series pointed to signs of cooling in the labor market along with a slowdown in the economy. With this week’s consumer and producer inflation reports colder than expected, the overall outlook has supported the market consensus that the Federal Reserve is done with rate hikes and can achieve a soft landing.
Treasury yields were lower on Thursday. The 30-year yield (US30Y) fell 5 basis points to 4.64%, while the 10-year yield (US10Y) fell 7 basis points to 4.47%. The more rate-sensitive short-term 2-year yield (US2Y) fell 6 basis points to 4.85%.
See live data on how Treasury yields are performing across the curve on the Seeking Alpha bond page.
