US stocks extended their downtrend Thursday as optimism about easing inflation and a Federal Reserve policy shift eased, while Wall Street analyzed a variety of corporate earnings.
The S&P 500 (^GSPC) fell 0.3% after coming off a low of more than 1%, while the Dow Jones Industrial Average (^DJI) was about unchanged, losing more than 300 points. The technology-focused Nasdaq Composite (^IXIC) fell 0.4%.
St. Louis Federal Reserve Chairman James Bullard’s comments set off a bad day on Wall Street, as he suggested the Fed’s monetary tightening campaign has so far had “limited effects” on observed inflation and that even a “dovish” policy from here would have to raise the federal funds rate by at least another percentage point.
His colleague, Federal Reserve Bank of Minneapolis Neel Kashkari, echoed that sentiment in separate remarks, indicating that he had seen little evidence of a cooling in underlying demand and that the Fed “isn’t there yet” to halt the rate hike. rate hikes.
Under the spotlight of economic data, unemployment insurance claims fell last week, holding near record lows even as a flurry of tech companies signal layoff plans. Initial jobless claims, the job market’s timeliest snapshot, came in at 222,000 for the week ending Nov. 10. 12, a drop of 4,000 from the previous week, Labor Department data showed Thursday.
A recent rebound in stock markets lost steam on Wednesday after strong October retail data offset hopes for a slowdown in central bank policy, recently rekindled by a series of softer inflation reports. Target’s lost earnings also weighed on sentiment in Wednesday’s session, with the company citing inflation and a deteriorating economic environment ahead of the key holiday shopping season.
Other industry peers fared better during the period.
Macy’s (M) shares rose more than 15% after the department store giant topped estimates and raised its full-year earnings forecast, buoyed by strong demand in the luxury areas of its business . Kohl’s (KSS), meanwhile, beat earnings expectations but withdrew its full-year forecast due to “significant” macroeconomic headwinds and the unexpected transition of its chief executive officer. Shares recovered from early day losses to close up 5%.
Shares of Bath & Body Works (BBWI) rose 25% after the maker of personal care products and home fragrances raised its full-year profit outlook. Retailers Walmart (WMT), Lowe’s (LOW), Home Depot (HD), all beat analyst estimates this week.
Elsewhere, as the earnings season reaches its final stretch, Nvidia (NVDA) Chief Executive Officer Jensen Huang said strong demand for the chips will help the company weather potential economic challenges, sufficient assurance to offset losses in the its gaming business. Shares fell 1.5%.
Machine maker Cisco Systems (CSCO) saw shares rebound 5% after the company provided positive revenue outlook and said it was cutting its workforce and reducing office space.
Meanwhile in Washington, DC, Republicans were expected to win a majority in the House of Representatives on Wednesday, resulting in the division of control of the US Congress, a positive sign for investors as stocks have historically outperformed in times of political stalemate.
However, strategists said inflation and economic conditions remain the focus of attention for markets. Seema Shah, Chief Global Strategist at Principal Asset Management, said the result should be “largely irrelevant to the broad market outlook.”
“Instead, it is historically high inflation, the Fed’s inflationary response and the resulting risk of recession, along with major structural policy decisions, that will determine the direction of the market.”
On this front, the president of the Federal Reserve Bank of San Francisco, Mary Daly, said in an interview with CNBC that a break in rates is not currently an option, indicating that the federal funds rate could reach the 4 range, 75%-5.25%.
But Federal Reserve Governor Christopher Waller said Wednesday that recent economic data makes him more comfortable with the possibility of a 50 basis point hike at the central bank’s December meeting.
Goldman Sachs, while forecasting a 0.50% hike next month, added another quarter-point hike in May 2023 to its forecast, raising its expectations for the top federal funds rate to 5-5.25 %.
Alexandra Semenova is a reporter for Yahoo Finance. Follow her on Twitter @alexandraandnyc
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