Stocks ended sharply lower Thursday, dashing hopes of a last-minute Santa Claus rally, after strong consumer confidence data and better-than-feared earnings failed to offset negative news from semiconductor giant Micron Technology (MU), which announced plans to lay off 10% of its workforce.
The Dow Jones Industrial Average fell 348 points, or 1.09%, to 33,027, while the S&P 500 dropped 1.45% and the tech-focused Nasdaq lost 2.18%.
The benchmark 10-year Treasury yield slipped to 3.684% in late New York trading, while the yield on the policy sensitive 2-year Treasury was up at 4.28%. Yields and prices move inversely.
"The Grinch selloff is firmly in place after Micron delivered a gloomy outlook and as better-than-expected US economic data supported the Fed's case for more ongoing rate increases," said Edward Moya, senior market analyst for the Americas with Oanda.
"Global coordinated central bank tightening has yet to fully impact most of the economic readings for the major economies and that should have investors nervous over earnings downgrades and credit risks," he added.
The selloff followed two positive days for stocks, which had raised hopes for a so-called Santa Claus rally -- a period of historically positive returns for stocks leading into the Christmas holiday break.
Micron to Layoff 10% of Workforce
During regular trading Wednesday, the Dow gained 526.74 points, while the S&P 500 and Nasdaq Composite surged 1.49% and 1.54%, respectively -- thanks to consumer-confidence data that jumped to its highest level since April.
Even with Wednesday’s gains, stocks are on pace to finish off the month of December with losses. All three major averages are slated to break a three-year win streak and post their worst yearly performance since 2008.
Driving some of the negative sentiment Thursday was Micron Technology (MU), whose shares slipped 3.4% on disappointing quarterly results as well an updated forecast for first-quarter earnings that is less than half of what Wall Street analysts were expecting.
The company also announced that it will lay off up to 10% of its workforce in the new year amid slumping demand for chips.
The chip industry is experiencing its worst imbalance between supply and demand in 13 years, Micron CEO Sanjay Mehrotra said Wednesday. Inventory should peak in the current period, then decline the rest of the year, Mehrotra said.
Initial claims for state unemployment benefits rose 2,000 to a seasonally adjusted 216,000 for the week ended Dec. 17, the Labor Department said. Economists polled by Reuters had forecast 222,000 claims for the latest week.
Under Armour (UAA) shares were off 2.3% after the athletics apparel maker selected Marriott International (MAR) President Stephanie Linnartz as its next CEO.
Linnartz is the third permanent chief executive in Under Armour’s 22-year history but the second since 2019, when the founder, Kevin Plank, stepped away from overseeing day-to-day activities. She was one of 60 candidates being considered by the company.
Tesla Continues to Fall
Tesla (TSLA) shares fell 8.9% one day after the electric car maker's eclectic CEO, Elon Musk, announced he was stepping away as CEO of Twitter. Shares of Tesla have fallen more than 60% this year.
Carmax (KMX) shares fell 3.6% after the used vehicle dealer missed Wall Street's third-quarter earnings expectations. The company cited "widespread inflationary pressures, climbing interest rates, and low consumer confidence" as factors behind a 20.8% drop in sales.
States reported that 211,000 workers filed for new unemployment benefits during the week ending Dec. 10, a decrease of 20,000 from the previous week's revised level.
The number of workers continuing to claim unemployment benefits -- 1.67 million -- has been steadily rising through the year and is now just under the pre-pandemic average of 1.7 million.
New weekly applications for jobless benefits have remained low all year, even as the technology and real estate sectors began to downsize in recent months. Layoffs overall also remain low, despite signs the economy will tip into a recession in 2023.
Indeed, despite persistent inflation and rising interest rates, U.S. employers added 263,000 jobs in November. There are nearly two job openings for every unemployed worker and the unemployment rate is 3.7%, just above a half-century low.
