As the anticipation surrounding Federal Reserve Chair Jerome Powell’s upcoming speech on Friday looms over Wall Street, U.S. stocks experienced a decline on Thursday. The S&P 500, after a two-week rally, fell 0.9%, marking its worst day. The Dow Jones Industrial Average dropped 177 points, or 0.4%, while the Nasdaq composite sank 1.7%.
The decline in stocks was triggered by rising Treasury yields, adding pressure to the bond market amidst mixed data on the U.S. economy. The economic scenario, burdened by high interest rates aimed at controlling inflation, saw a slight increase in U.S. workers applying for unemployment benefits. While the figures are historically low, this uptick could hint at a cooling job market.
A divided U.S. business landscape was further exemplified by conflicting reports. While services businesses show growth acceleration, the country’s manufacturing sector seems to be contracting. This data suggests that the U.S. economy is still growing, albeit with underlying fragility.
“Growth has become increasingly dependent on the service sector as manufacturing, a key economic cycle indicator, is in decline,” noted Chris Williamson, chief business economist at S&P Global Market Intelligence. With the Federal Reserve aiming to strike a balance through high-interest rates, the expectation is for a rate cut at the next meeting in September.
Attention is now turned towards Powell’s speech at the economic symposium in Jackson Hole, where hints about the impending rate cuts are eagerly awaited. While investors have historically overestimated such cuts, the recent drop in Treasury yields has helped boost mortgage rates, facilitating an increase in home sales.
Despite the overall decline in stocks, several companies reported positive news. Peloton surged 35.4% after surpassing sales forecasts and narrowing losses, resulting in modest revenue growth. Zoom Video Communications also rose by 13%, excelling in results and revenue for the latest quarter.
However, the day saw more stocks falling than rising, including Nvidia and Snowflake, which both experienced a decline despite surpassing profit and revenue expectations. Advance Auto Parts also tumbled after missing Wall Street’s profit forecast.
In conclusion, as the S&P 500 and other indexes faced losses amidst economic uncertainties, market fluctuations continue to highlight the delicate balance between optimism and caution in the financial landscape. With investors attentively awaiting Powell’s speech and subsequent Fed decisions, the market remains on edge, poised for potential shifts.
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