Following a record-setting streak, US stocks ended lower on Thursday as investors paused to assess the economy’s continued outperformance and anticipate a critical jobs report. The Dow Jones Industrial Average fell 0.55% to 44,765.71, the S&P 500 slipped 0.19% to 6,075.11, and the Nasdaq Composite declined 0.18% to 19,700.26.
Table Content:
Market Sentiment and Economic Outlook
“The S&P 500 has continued to reach new record highs after its best month of the year in November,” observed Jeff Buchbinder, Chief Equity Strategist at LPL Financial. He attributed the market’s strength to heightened consumer optimism fueled by the Federal Reserve’s easing cycle and the US election. Hopes for lower taxes, deregulation, and robust corporate profits are driving this positive sentiment.
However, Buchbinder cautioned that “stretched valuations, excessively bullish sentiment, and the potential for an economic slowdown in 2025” could counterbalance these supportive factors.
Boeing Plea Agreement Rejected
Boeing (BA) shares dipped after a federal court rejected a plea agreement between the company and the Department of Justice related to the two fatal 737 Max crashes in 2017 and 2018. Judge Reed O’Connor of the Northern District of Texas rejected the agreement, which would have involved Boeing paying a nearly $500 million fine and investing a similar amount in safety enhancements. The judge granted both parties 30 days to propose a revised plea. Boeing shares closed 0.4% lower at $157.75 following the news.
Market Opening and Early Trading
The S&P 500 opened slightly lower, down 0.08%, while the Nasdaq edged up 0.05%. The Dow shed 85 points, and the Russell 2000 fell 0.26%.
American Airlines Soars on Upgraded Guidance
American Airlines Group (AAL) shares surged in premarket trading after the airline raised its fourth-quarter earnings guidance, citing record domestic travel during the Thanksgiving holiday. The company now anticipates adjusted earnings per share between 55 cents and 75 cents, more than double the lower end of its previous forecast. This positive outlook follows the Transportation Security Administration’s report of screening a record 3.1 million passengers on December 1st, the busiest travel day in US history. American Airlines shares opened at $15.97, up 7.3%.
Jobless Claims and Market Impact
The Labor Department reported 224,000 initial jobless claims last week, slightly exceeding expectations. This figure, combined with ADP’s underwhelming private sector hiring report, might influence predictions for Friday’s November non-farm payrolls data. Despite the data, stock futures indicated minimal changes, with the S&P 500 projected to open 4 points lower and the Dow anticipated to retreat 45 points.
Federal Reserve Policy and Market Expectations
The strong economic performance, with the Atlanta Fed’s GDPNow forecasting 3.2% growth, underpinned the Federal Reserve’s current interest rate policy during Chairman Jerome Powell’s appearance at the New York Times DealBook summit. Powell affirmed the US economy’s robust health and expressed confidence in its continued strength. He acknowledged the diminished downside risks in the labor market, stronger-than-anticipated growth, and slightly elevated inflation. While markets still anticipate a final rate cut in 2024, expectations for further reductions in the first half of 2025 have lessened due to persistent inflation linked to the positive growth outlook.
Conclusion
The stock market’s record run took a pause as investors digested economic data and awaited the November jobs report. While positive sentiment driven by economic strength and policy expectations remains, potential headwinds like stretched valuations and future economic slowdown possibilities are keeping investors cautious. The upcoming jobs report will be crucial in shaping market direction in the near term.
