NEW YORK — On Thursday, U.S. stock markets experienced a downturn, influenced by some potentially troubling economic indicators.
The S&P 500 index declined by 0.5%, marking its fourth drop within the last six days. This comes as the index had been on a remarkable upward trend, positioning itself for one of its most successful years of the century.
The Dow Jones Industrial Average fell by 234 points, also reflecting a decrease of 0.5%, while the Nasdaq composite dropped by 0.7% after reaching a record high just a day earlier.
An economic update released in the morning revealed that the number of U.S. workers applying for unemployment benefits exceeded expectations, raising concerns about the job market. Additionally, inflation at the wholesale level, prior to reaching consumers, was reported to be higher than economists had anticipated for the previous month.
While these reports do not predict an immediate economic crisis, they do cloud one of the prevailing hopes that has propelled the S&P 500 to an impressive 57 all-time highs this year: the notion that inflation is decreasing sufficiently to prompt the Federal Reserve to continue lowering interest rates, while the economy remains robust enough to avoid a recession.
Among the two reports, analysts suggest that the increased unemployment claims might pose a more significant concern for the markets. Chris Larkin, managing director of trading and investing at E-Trade from Morgan Stanley, noted that a spike in egg prices might have contributed to the unexpectedly high inflation figures.
He remarked, “A single week’s data doesn’t erase what has generally been a steady flow of positive labor market indicators, but the Fed may be particularly attentive to any potential weakening in job growth.”
Market participants largely anticipate that the Federal Reserve will enact a reduction in its primary interest rate during its upcoming meeting. Should this expectation be realized, it would signify the Fed’s third consecutive rate cut since starting to lower rates from a peak not seen in two decades in September. The central bank aims to bolster a cooling job market while achieving an inflation target of around 2%.
Reducing interest rates could stimulate the economy and enhance investment valuations, but such moves could also exacerbate inflation concerns.
Following the rate cuts by the Federal Reserve, other central banks have also made similar moves. The European Central Bank implemented a quarter-percentage-point rate cut, aligning with many investors’ expectations, while the Swiss National Bank announced a sharper reduction of half a percentage point.
The Swiss central bank, post-announcement, cited uncertainties regarding the potential impacts of U.S. President-elect Donald Trump’s victory on economic policies, alongside concerns about the political climate in Europe.
Trump has advocated for tariffs and other measures that could disrupt global trade dynamics. On Thursday, he ceremoniously opened trading at the New York Stock Exchange to enthusiastic chants of “USA.”
In corporate news, Adobe experienced a significant decline of 13.7%, becoming one of the largest detractors from the market despite surpassing analysts’ expectations for quarterly profits. The company’s forecasts for profit and revenue for the upcoming fiscal year fell slightly short, causing disappointment among investors.
Conversely, Warner Bros. Discovery surged by 15.4% after announcing a new corporate structure that separates its streaming initiatives and film studios from its traditional television operations. CEO David Zaslav mentioned that this move “enhances our flexibility with potential future strategic opportunities,” leading to speculations about possible spin-offs or divestitures.
Kroger shares climbed 3.2% once the grocery giant announced plans to resume stock buybacks following the cancellation of its proposed merger with Albertsons. Kroger’s board authorized a plan to repurchase up to $7.5 billion of its shares, replacing an existing authorization of $1 billion.
In summary, the S&P 500 experienced a decline of 32.94 points to close at 6,051.25. The Dow Jones Industrial Average dropped by 234.55 points, finishing at 43,914.12, while the Nasdaq composite concluded the day down 132.05 points at 19,902.84.
Internationally, European stock indices remained relatively stable after the European Central Bank’s rate cut. In contrast, Asian markets saw positive movement, with indexes gaining 1.2% in Hong Kong and 0.8% in Shanghai as leaders convened in Beijing to outline economic strategies and targets for the upcoming year.
South Korea’s Kospi rose 1.6% for the third consecutive day, bouncing back from previous political turmoil that had included a brief imposition of martial law by the president.
In the bond market, yields on the 10-year U.S. Treasury increased to 4.33%, up from 4.27% earlier in the week.
