Stocks ended lower Thursday as investors extended bets on autumn Federal Reserve interest-rate cuts following dovish minutes from the central bank's July meeting and a big revision to gains in the domestic job market.
The Dow Jones Industrial Average lost 177.72, or 0.43%, to finish the session at 40,712.78, while the S&P 500 slipped 89% to 5,570.64, and the tech-heavy Nasdaq dropped 1.67% to end the day at 17,619.35.
Federal Reserve Chair Jerome Powell is scheduled to deliver his policy speech from the central bank’s annual conclave in Jackson Hole, Wyoming.
“Investors are eagerly awaiting Chair Powell’s Jackson Hole speech tomorrow,” said Adam Turnquist, chief technical strategist for LPL Financial. “We suspect he will likely set the stage for a September rate cut given the trajectory of inflation data and continued signs of a cooling labor market.”
“We don’t expect to hear much color on the degree of potential policy changes but believe another disappointing employment report next month could tilt the scale toward a 0.50% cut in September, he added.
Turnquist said that “although we welcome the recent rebound and more upbeat macroeconomic data, market breadth on the latest bounce has been underwhelming, and there isn’t quite enough technical evidence to make the case that the pullback is over.”
"We expect volatility to remain elevated in the coming months as the market waits for more clarity on the economy, election, and a better seasonal setup," he said.
Updated at 12:13 PM EDT
Mid-day pullback
The S&P 500 was last marked 27 points, or 0.48% lower heading into the afternoon session as Treasury yields test one-week highs heading into tomorrow's Jackson Hole speech from Fed Chairman Jerome Powell.
The Nasdaq is down around 179 points, or 0.83% while the Dow is off 124 points.
$SPX pic.twitter.com/vOIXwIti1F
— Thomas Thornton (@TommyThornton) August 22, 2024
Updated at 9:50 AM EDT
Still growing
The private sector lost some steam this month, data from S&P Global indicated, with the manufacturing sector remaining mired in contraction but the more important services sector rising just ahead of Wall Street forecasts.
The headline Composite index, however, was pegged at 54.1, down modestly from 54.3 in July but still indicating solid expansion for the world's biggest economy.
Benchmark 10-year bond yields hit a session high of 3.850% following the data release, while stocks were little-changed from their opening bell levels.
US S&P Global Manufacturing PMI Aug P: 48.0 (est 49.5; prev 49.6)
— LiveSquawk (@LiveSquawk) August 22, 2024
- S&P Global Services PMI Aug P: 55.2 (est 54.0; prev 55.0)
- S&P Global Composite PMI Aug P: 54.1 (est 53.2; prev 54.3)
Updated at 9:36 AM EDT
More gains
The S&P 500 rose 19 points, or 0.33%, in the opening minutes of trading, with a 76 point, or 0.43% advance for the tech-focused Nasdaq.
The Dow, meanwhile, gained 125 points while the small-cap Russell 2000 rose 0.03%.
“With yesterday’s FOMC minutes confirming the Fed’s intention to cut rates next month, traders and investors may look past today’s middle-of-the-road jobless claims and focus on next week’s inflation data and Nvidia earnings," said Chris Larkin, managing director for trading and investing at E*Trade from Morgan Stanley.
"Recession jitters may have receded, but the markets are still probably more concerned about the economy cooling too much rather than reheating," he added.
S&P 500 Opening Bell Heatmap (Aug. 22, 2024)$SPY +0.40%🟩$QQQ +0.52%🟩$DJI +0.20%🟩$IWM -0.04%🟥 pic.twitter.com/h9xNkrSQya
— Wall St Engine (@wallstengine) August 22, 2024
Updated at 8:36 AM EDT
Still solid
Weekly jobless claims rose by around 2,000 over the period ending on August 10, the Labor Department said Thursday, with 230,000 Americans filing for first time unemployment benefits.
The gain takes the four-week average to 236,000, a modest dip from the prior week average and effectively unchanged from the same period last year, with continued claims pegged at 1.863 million.
Treasury yields were modestly higher in the wake of the data release, with 10-year notes rising to 3.845% and 2-year notes trading at 3.987%.
Stocks, however, extended their premarket gains, with futures tied to the S&P 500 indicating an 8 point opening bell gain and the Nasdaq called 50 points higher.
⚠️ The non-seasonally adjusted claims fell back towards its YTD lows. This isn't something you see when there's a big labor market recession. Doesn't mean jobs market is strong (hiring has stalled). But not seeing the type of layoffs yet that justifies aggressive Fed cuts $USD pic.twitter.com/dBR7ZnjNJu
— Viraj Patel (@VPatelFX) August 22, 2024
Updated at 7:53 AM EDT
No hurry on rate cuts
Kansas City Fed President Jeffery Schmid told CNBC that the Bureau of Labor Statistics' changes to the overall employment total over the 12 months ended in March wouldn't much affect policy deliberations next month in Washington.
Schmid, host of the central bank symposium that kicks off today in Jackson Hole, Wyo., added in a Bloomberg interview that "we need to see a little bit more” in terms of inflation and jobs data before deciding on the next rate move.
“It makes sense for me to really look at some of the data that comes in the next few weeks (and) I still think we could see a little bit of a demand pickup if we’re not careful with the decisioning," he said.
Fed’s Schmid: Asked About Jobs Benchmark Revisions, Says It Doesn't Change A Lot - CNBC Interview
— LiveSquawk (@LiveSquawk) August 22, 2024
- We've Seen Some Cooling In Labour Market, But Generally Pretty Strong
Stock Market Today
Stocks ended higher yesterday, taking the S&P 500 back to within less than 1% of its July record. A late-afternoon rally was accelerated by the release of minutes from the Fed's policy meeting last month in Washington.
The minutes showed that a "vast majority" of Fed officials "observed that, if the data continued to come in about as expected, it would likely be appropriate to ease policy at the next meeting."
Added to a big downward revision for jobs growth over the 12 months ended in March by the Bureau of Labor Statistics, which pared its previous tally by 818,000, and markets boosted bets on a 0.5-percentage-point cut from the Fed next month in Washington.
That sentiment is carrying over into the Thursday session, with benchmark 10-year Treasury note yields trading at 3.816% and 2-year notes pegged at 3.955%.
CME Group's FedWatch tool, meanwhile, puts the odds of a 50-basis-point reduction at around 30.5%, with markets betting on a full percentage point of cuts between now and the end of the year.
Investors' focus in today's session is likely to remain on the economy and the labor market, with weekly jobless claims data due at 8:30 a.m. U.S. Eastern time and S&P Global's flash reading of August manufacturing sector activity due 90 minutes later.
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The Fed's Jackson Hole symposium all kicks off later today in Wyoming, with Chairman Jerome Powell's keynote address on deck for Friday at 10 a.m. Eastern.
Heading into the start of the trading day, futures contracts tied to the S&P 500 suggest a modest 5 point advance, with the Dow Jones Industrial Average called 50 points higher. The tech-focused Nasdaq is priced for a 27-point gain.
Snowflake (SNOW) shares were a notable premarket mover, falling 9.7% to $121.97 each, after the data analytics provider issued a muted forecast for profit margins, offsetting solid second-quarter earnings.
Pandemic darling Zoom Video Communications (ZM) , meanwhile, rose 3.7% after it topped Wall Street's second-quarter earnings forecast and boosted its full-year profit outlook.
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In overseas markets, the broadest measure of stocks, the MSCI all-world index, rose 0.41% to extend its year-to-date advance close to 15%, and near to July all-time high.
Europe's Stoxx 600 was marked 0.5% higher in Frankfurt, while Britain's FTSE 100 gained 0.24% in early London dealing.
Overnight in Asia, a solid 0.68% gain for the Nikkei 225 lifted the benchmark to its highest in three weeks, taking it back above the levels it traded at prior to the carry-trade meltdown on Aug. 5.
The regional MSCI ex-Japan benchmark, meanwhile, was marked 0.31% higher heading into the close of trading.
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