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Stocks lose ground, Dow, Nasdaq turn red, S&P barely up
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Energy leads S&P 500 sector gainers; cons disc weakest
group
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Euro STOXX 600 index up ~0.1%
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Dollar up slightly; crude surges; gold, bitcoin off
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U.S. 10-Year Treasury yield edges down to ~3.91%
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SEARCHING FOR SOFTNESS: GDP REVISED DOWN, CLAIMS DIP (1116 EST/1616 GMT) Two sets of data released on Thursday did little to change the "higher for longer" Fed narrative - the economy is still fairly robust and the labor market remains surprisingly tight, despite Powell & Co's restrictive stance. The Commerce Department took a second stab at fourth-quarter GDP , revising it down to a still-solid 2.7% on a quarterly annualized basis. The 20 basis point drop was mitigated by a sharp upgrade in business investment, particularly inventories.
Exports and fixed investment - which includes construction spending - were detractors, together reducing the topline by a full percentage point. Quarterly headline and core inflation were jacked up to 3.7% and 4.3%, respectively, but market participants are willing to look past that, for now, because the less stale monthly PCE price index is due on Friday (at any rate, economists polled by Reuters expect core PCE prices to have grown by 4.3% year-on-year, signifying a modest cooldown). "The pace of expansion should slow in Q1," writes Rubeela Farooqi, chief U.S. economist at High Frequency Economics. "From the Fed's perspective, a slowdown in the economy is anticipated and will be welcome news."
The topline GDP downgrade was largely attributable to weaker-than-previously-stated consumer spending - slashed to 1.4% from 2.1% - a worrisome development, considering the consumer is burdened with about 70% of the U.S. economy. And services expenditures did all the lifting. Personal consumption of durable goods actually subtracted 0.2 percentage points from total GDP, while spending on non-durable merchandise contributed zilch. "With excess savings buffers contracting, income growth anticipated to slow, and credit demand poised to weaken, we expect that consumer spending will retrench later this year," says Oren Klachkin, lead U.S. economist at Oxford Economics (OE). Meanwhile, the number of U.S. workers filing first-time applications for unemployment benefits unexpectedly fell last week to 192,000, according to the Labor Department, or 8,000 fewer than analysts expected. The report marks the sixth straight week of initial claims south of the 200,000 level commonly associated with healthy labor market churn. The data stands as yet another reminder - as if we needed one in the wake of January's blowout employment report - that the labor market remains tighter than Fort Knox. Remember, that unemployment is at its lowest since 1969 and nearly two unfilled jobs for every jobless worker.
Employers aren't exactly in a rush to hand out pink slips, despite the recent spate of headline-grabbing layoff announcements from big tech.
That's worrisome for the Fed, as it keeps upward pressure on wage inflation. Ongoing claims , which are reported on a one-week lag and are symptomatic of the pace of hiring, slid by 2.2% to 1.654 million.
"We expect jobless claims to trend higher as the economy slows in response and eventually enters a mild recession later this year," says Nancy Vanden Houten, lead U.S. economist at OE. "But the rise may be muted compared to prior recessions as employers will be reluctant to lay off workers that have been difficult to find in the first place." "Given the strength of recent data, it will be more surprising if policymakers don't go even further than anticipated just a few months ago," says Jim Baird, chief investment officer at Plante Moran Financial Advisors.
"That could come in the form of larger rate hikes ... by
lifting short-term rates even higher than forecast, or by
holding them higher for longer."
After a solid start to the session Wall Street lost ground
with only the S&P 500 able to cling to a tiny gain. Chips were the clear star of the show, powered by Nvidia after its quarterly report.
(Stephen Culp)
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WALL STREET EQUITIES KICK OFF THE DAY WITH GAINS (1020
EST/1520 GMT)
Wall Street's three major indexes are advancing on Thursday
with the technology-heavy Nasdaq leading the charge with a
particular boost from semiconductors.
Equities had lost ground on Wednesday after the release of Federal Reserve meeting minutes.
The Philadelphia semiconductor index is up more than 2% with its biggest gains coming from Nvidia whose quarterly report late on Wednesday also put the rest of the sector in a good mood.
Nvidia's Q1 revenue forecast beat consensus as its CEO said use of its chips for artificial intelligence (AI) services like chatbots went "through the roof in the last 60 days." Still investors are watching economic data closely with their focus still on the Federal Reserve's rate hiking cycle.
The number of Americans filing new claims for unemployment benefits unexpectedly fell last week, continuing to signal persistently tight labor market conditions. Also, a separate Commerce Department report confirmed the economy grew solidly in the fourth quarter, though much of the increase in output came from unsold goods at businesses. Only communication services and consumer discretionary are lower on Thursday. Technology is up more than 1% along with energy , which is being helped by rising oil prices.
Here is a market snapshot from just after 1015 EST:
(Sinéad Carew)
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S&P 500 ENERGY SECTOR STILL WELL-CAPPED BY RECORD HIGHS (0900 EST/1400 GMT) The S&P 500 energy sector has been the market's go to group. SPNY rocketed 59% in 2022, for its biggest yearly percentage rise ever. In fact, it was the only S&P 500 sector to post a gain in 2022, in a year that the benchmark index ended down nearly 20%. That said, energy failed to surpass its 2014 record high, and waning monthly momentum suggests caution: SPNY hit a high of 724.74 in November of last year, putting it within 2% of its 738.71 record-high recorded in June 2014. However, the monthly RSI failed to confirm the sector's rise late last year. A similar pattern of divergence developed into the group's 2008 top. Since its November peak, the sector has gyrated wildly, and now stands down 12% from that high. Year-to-date, the energy sector is off just over 5% vs an SPX rise of about 4%. SPNY is on track to end February above its rising 12-month moving average (MMA) for a 27th-straight month. If so, it will exceed the 26-month run into its 2014 high. The sector ended above its 12-MMA for 62-straight months into its 2008 top. In any event, with the 12-MMA now around 625, or less than 2% below Wednesday's 637.29 close, the group may need to quickly heat up again. Traders will be watching for a monthly close below the 12-MMA as it may confirm a significant break in SPNY's longer-term advance. Meanwhile, NYMEX crude futures have been on the back foot. The futures now around $75.00 are down more than 40% from their $130.50 March 2022 high, and a chart magnet still beckons for lower levels.
(Terence Gabriel)
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(Terence Gabriel is a Reuters market analyst. The views
expressed are his own)
