The longest winning streaks for the Nasdaq and S&P 500 in over two decades were put in jeopardy on Thursday as U.S. equities declined and Treasury rates increased following a dismal auction of 30-year bonds and remarks made by Federal Reserve Chair Jerome Powell.
Powell stated that although there may not be much more support from increases in the supply of labour, products, and services, central bank officials “are not confident” that interest rates are high enough to control inflation.
Before Powell’s remarks, the market had seen a little decline in stocks as interest rates rose following a lacklustre auction of $24 billion in 30-year Treasuries, with demand for the debt exceeding supply by 2.24 times. The yield on the benchmark 10-year Treasury note increased by over 12 basis points to 4.626% at the end of the day.
Powell is “taking a hawkish viewpoint again,” according to Peter Cardillo, chief market economist at New York’s Spartan Capital Securities. “He’s reassuring the market that the fight against inflation has not been won a and if economic conditions warrant, they won’t hesitate to hike rates again,” he stated.
“If you add up all the remarks, Powell is telling the market not to get too complacent and that’s putting some pressure on stocks.”
The S&P 500 dropped 28.02 points, or 0.64%, to 4,354.76; the Nasdaq Composite lost 89.39 points, or 0.65%, to 13,561.02; and the Dow Jones Industrial Average slid 203.81 points, or 0.60%, to 33,905.72.
The monthly payrolls report and other softening economic indicators have helped stocks rise, and U.S. Treasury yields have fallen from multi-year highs as investors believe the Fed’s most recent policy meeting indicated the central bank was done raising interest rates.
The pace of gains slowed following Wall Street’s explosive rise last week, but on Wednesday the S&P 500 index managed to continue its winning run for an eighth consecutive session, while the Nasdaq recorded its ninth consecutive session of gains—the longest winning streaks for both in two years.
Thursday’s advances for the benchmark S&P index would be the longest run of increases since 2004.
The chances of a decrease of at least 25 basis points in May fell below 40% following Powell’s remarks, but the majority of traders are still betting that the Fed will leave interest rates steady this year, according to the CME Group’s FedWatch Tool.
Following news in the local media that the chip designer intends to introduce three new chips for China, shares increased 2.9%.
Walt Disney surged 6.9% on a surprise quarterly profit and the news that major studios and Hollywood performers had tentatively struck an agreement.
Healthcare and consumer discretionary saw the biggest falls, accounting for roughly 2% of the declines in nearly all 11 major S&P sectors.
A negative third-quarter sales projection caused semiconductor company Arm Holdings, among other equities, to fall 5%.
On the NYSE, falling issues exceeded advancers by a ratio of 2.3 to 1, and on the Nasdaq, the difference was 2.4 to 1.