NEW YORK — On Thursday, U.S. stock markets experienced declines following some potentially troubling economic data.
The S&P 500 dipped by 0.5%, marking its fourth drop in the last six trading sessions. This decline comes amidst an overall rally that has positioned the index to be one of the best-performing years in recent history.
The Dow Jones Industrial Average fell by 234 points, also a decrease of 0.5%, while the Nasdaq composite dropped 0.7% from its record high set the previous day.
Early reports indicated an unexpected increase in unemployment benefit applications, as more workers sought assistance last week than analysts had anticipated. Additionally, data revealed that wholesale level inflation—before it affects consumers—was stronger than expected in the previous month.
While these reports do not signal a crisis, they do temper the optimism that has propelled the S&P 500 to an impressive 57 all-time highs this year. Investors have been hopeful that inflation would slow sufficiently to incentivize the Federal Reserve to continue cutting interest rates without pushing the economy into a recession.
Among the reports, the disappointing job market data is likely to hold greater significance for the markets, according to Chris Larkin, managing director of trading and investing at E-Trade from Morgan Stanley. A noted spike in egg prices may have influenced the unexpectedly high inflation data.
Larkin stated, “One week’s data doesn’t erase the consistent stream of robust labor market statistics, but the Fed is closely monitoring any signs of a weakening job market.”
Market participants largely anticipate that the Federal Reserve will announce a cut in its primary interest rate at its meeting next week. Should this occur, it will mark the third consecutive reduction by the Fed since initiating cuts in September from a two-decade peak. The goal is to support a cooling job market while maintaining inflation close to its 2% target.
Interest rate reductions would provide a boost to the economy and enhance asset prices; however, they could also contribute to rising inflation pressures.
If the Fed decides to lower rates, it would be in line with actions taken by other central banks, which also made rate cuts on Thursday. The European Central Bank reduced its rates by a quarter percentage point, in line with many investors’ expectations, while the Swiss National Bank implemented a more significant cut of half a percentage point.
After its decision, the Swiss central bank cited uncertainties regarding how the economic policies of President-elect Donald Trump might unfold, alongside concerns regarding political developments in Europe.
Trump has proposed tariffs and other policies that could potentially disrupt international trade. He participated in the opening of the New York Stock Exchange on Thursday amidst chants of “USA.”
On Wall Street, Adobe shares plummeted by 13.7%, becoming one of the largest detractors from market performance, even though it reported stronger-than-expected profits for the most recent quarter. However, projections for profit and revenue in the upcoming fiscal year fell slightly short of analysts’ expectations.
In contrast, Warner Bros. Discovery’s stock surged by 15.4% after announcing a new corporate structure that separates its streaming services and film studios from its traditional television sector. CEO David Zaslav noted that this reorganization “enhances our flexibility for future strategic opportunities,” sparking speculation about a potential spinoff or sale.
Kroger’s stock rose by 3.2% after announcing plans to resume share buybacks, following the abandonment of its merger attempt with Albertsons. The board approved a program to repurchase up to $7.5 billion of stock, in place of a prior $1 billion authorization.
Overall, the S&P 500 declined by 32.94 points to close at 6,051.25, the Dow Jones Industrial Average fell by 234.55 to reach 43,914.12, and the Nasdaq composite slipped by 132.05 to settle at 19,902.84.
In the global equity landscape, European markets remained relatively stable after the European Central Bank’s announcement on rates, while Asian markets showed strength. Indexes climbed 1.2% in Hong Kong and 0.8% in Shanghai as leaders convened in Beijing to outline economic plans for the year ahead.
South Korea’s Kospi saw a 1.6% increase, marking its third consecutive gain of at least 1%, rebounding from last week’s political unrest, which included a brief declaration of martial law by the president.
Regarding bonds, the yield on the 10-year U.S. Treasury rose to 4.33%, compared to 4.27% from late Wednesday.