Wall Street experienced a retreat on Thursday as investors carefully considered key economic indicators in anticipation of the Federal Reserve’s upcoming meeting next week.
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The Labor Department released a report on Thursday revealing that U.S. producer prices increased more than projected in November. However, a slowdown in service costs suggested a continued trend of disinflation. Initial jobless claims for U.S. unemployment benefits saw an unexpected rise last week, sparking concerns about the resilience of the labor market.
“Investors are primarily focused on deciphering the Fed’s next move. Is inflation poised to remain a significant issue, requiring the Fed to curtail rate cuts, or is a smoother path toward lower rates possible?” inquired Rob Haworth, senior investment strategist at U.S. Bank Wealth Management in Seattle.
Haworth also noted that profit-taking occurred after the Nasdaq reached a record high on Wednesday.
The Nasdaq had surpassed the 20,000 threshold for the first time on Wednesday, propelled by a substantial rally in technology stocks. Concurrently, the S&P 500 attained its highest point in nearly a week, bolstered by an inflation report that reinforced expectations of a 25-basis-point rate reduction at the Fed’s December 17-18 meeting.
Market Performance and Investor Sentiment
According to CME’s FedWatch Tool, trader bets on a rate cut next week exceed 98%. However, these bets also indicate an anticipated pause in January, following cautions from several Fed officials last week regarding the pace of monetary policy easing given the economy’s continued strength.
The Dow Jones Industrial Average declined 234.44 points (0.53%) to 43,914.12, the S&P 500 dropped 32.94 points (0.54%) to 6,051.25, and the Nasdaq Composite fell 132.05 points (0.66%) to 19,902.84.
Megacap and growth stocks displayed mixed performance, with Nvidia decreasing 1.4% while Microsoft edged up 0.1%.
Impact of Corporate Earnings and Forecasts
Adobe plummeted 13.7% after the Photoshop developer projected fiscal 2025 revenue below Wall Street estimates, impacting the broader technology sector. Among the 11 major S&P sub-sectors, only consumer staples stocks registered gains.
Wall Street’s major indexes have achieved record highs multiple times this year, driven by a rally in prominent tech stocks benefiting from enthusiasm surrounding artificial intelligence and the Fed’s interest rate reductions.
U.S. equities concluded a robust November following Donald Trump’s presidential election victory, fueled by expectations of business-friendly policies enhancing corporate profits. December has commenced with a generally positive trend.
Warner Bros. Discovery surged 15.4% following the media company’s announcement of plans to separate its declining cable-TV business from streaming and studio operations.
Nordson declined 8.2% as the dispensing-equipment manufacturer predicted fiscal 2025 revenue below Wall Street projections. Meanwhile, health insurer Centene rose 1.9% after forecasting its 2025 profit above estimates.
Market Breadth and Trading Volume
Declining issues surpassed advancing issues by a 3.11-to-1 ratio on the NYSE. On the Nasdaq, 1,209 stocks rose while 3,106 fell, with declining issues outnumbering advancers by a 2.57-to-1 ratio.
The S&P 500 recorded 10 new 52-week highs and nine new lows, while the Nasdaq registered 86 new highs and 154 new lows. Trading volume on U.S. exchanges totaled 13.61 billion shares, compared to the average of 14.17 billion shares for the full session over the last 20 trading days.
In conclusion, market performance reflected investor uncertainty as they weighed economic data and awaited the Federal Reserve’s upcoming meeting. While certain sectors and individual companies experienced significant fluctuations, overall market sentiment remained cautious. The Fed’s decisions next week will likely play a crucial role in shaping future market direction.
