Wall Street/ stock market/ inflation data/ jobless claims/ Treasury yields/ energy stocks/ Federal Reserve/ Newslooks/ NEW York/ J. Mansour/ Morning Edition/ U.S. stock markets eased Thursday after record highs, with inflation data showing only minor improvement and unexpected rises in unemployment claims. Treasury yields fluctuated as investors assessed potential Fed rate cuts, while energy stocks climbed on oil price gains.
Wall Street Records Slip: Quick Looks
- Market Pullback: The S&P 500 and Dow Jones dropped 0.2% each after recent highs.
- Inflation and Unemployment: Inflation edged down but missed forecasts; jobless claims increased.
- Treasury Yields Fluctuate: Yields rose slightly as traders speculated on future rate cuts.
- Energy Stocks Surge: Oil price hikes boosted energy sector stocks, balancing market losses.
Wall Street Pulls Back from Records Amid Inflation and Jobs Data
Deep Look
The U.S. stock market dipped Thursday, with major indexes pulling back slightly from record highs, as investors reacted to fresh economic data that pointed to a slower-than-expected deceleration in inflation and an increase in unemployment claims.
In early trading, the S&P 500 dropped by 0.2%, while the Dow Jones Industrial Average also fell by 0.2% or 97 points. The Nasdaq Composite likewise edged down 0.2% by midmorning. This retreat followed previous highs, fueled primarily by hopes of lower interest rates as the Federal Reserve recalibrates its strategy to support economic growth alongside inflation control.
The recent record-setting surge in stocks has been largely attributed to expectations that the Fed will continue cutting interest rates, which were recently at a two-decade high. Lower rates can stimulate the economy by making borrowing more affordable and often drive up investment prices. However, the pace of rate cuts hinges on whether inflation continues to approach the Fed’s target of 2%.
New economic data released Thursday showed that inflation edged down only slightly, from 2.5% in August to 2.4% in September, based on the Consumer Price Index (CPI). This was short of economists’ predictions of a steeper drop to 2.3%. Core inflation, which excludes volatile categories like food and energy, remained a bit above expectations, signaling that inflationary pressures may be more persistent than hoped.
Simultaneously, a separate report revealed that 258,000 Americans applied for unemployment benefits last week. While still historically low, the figure surpassed economists’ forecasts, showing a noticeable uptick in claims. These signals suggest potential slowing in the labor market, which could influence future Fed decisions.
In the bond market, Treasury yields reacted to the inflation and unemployment data, with fluctuations reflecting traders’ uncertainty regarding the Fed’s upcoming moves. The yield on the 10-year Treasury note climbed to 4.09% from 4.07% on Wednesday, while the two-year Treasury yield, more responsive to Fed policy expectations, fell slightly to 3.98% from 4.02%.
According to CME Group data, traders predominantly expect the Fed to announce a modest rate cut of 0.25% at its next meeting. However, a smaller segment anticipates the central bank might hold rates steady, following earlier calls for a more substantial 0.5% cut due to previously robust economic data. Annex Wealth Management’s Chief Economist Brian Jacobsen noted that unless a dramatic drop in employment is shown in the November jobs report, even a 0.25% cut might appear more assertive than necessary.
On the corporate side, Delta Air Lines reported lower-than-anticipated summer performance, pushing its shares down 0.7%. Although holiday travel demand remains high, the airline is forecasting a decrease in travel surrounding the upcoming election period.
Meanwhile, energy stocks provided some counterbalance to the broader market losses. Brent crude oil prices rose by 2.5%, hitting $78.49 a barrel, while U.S. crude climbed 2% to $74.72 a barrel, bolstering energy sector stocks. Exxon Mobil’s shares were up by 1.1%, and Valero Energy gained 2.7%.
Internationally, Hong Kong’s Hang Seng Index jumped 3%, reversing a recent drop driven by investor hopes that China will introduce additional economic stimulus. Though markets faced disappointment earlier in the week over stimulus inaction, optimism persists that further measures may soon follow.
