The recent decline in US stocks persisted on Thursday as investors attempted to recover from a poor start to the year and Federal Reserve policymakers raised the possibility of an early interest rate decrease.
Even though the benchmark S&P 500 (\GSPC) declined by around 0.3%, the Dow Jones Industrial Average (\DJI) ended the day slightly above the flatline. The Nasdaq Composite (^IXIC) saw a sell-off on Wednesday, but it rebounded at times during the session and ended the day over 0.6% below the flatline.
Numerous data points that were made public on Thursday morning indicated that although salaries are still declining, the labour market is still robust, which is encouraging in the fight against inflation.
According to the most recent ADP employment report, private employers created 164,000 positions in December, which was more than the 103,000 jobs gained in November and more than the 115,000 gains that analysts had predicted.
In other news, the Department of Labour revealed that, contrary to economist forecasts of 216,000, just 202,000 unemployment claims were submitted the previous week.
In the meantime, US bond rates started to rise again. The 10-year Treasury yield (\TNX) moved around 4% on Wednesday after retreating from that mark the previous day.
On Thursday, the stock market’s early 2024 decline persisted.
Even though the benchmark S&P 500 (\GSPC) declined by around 0.3%, the Dow Jones Industrial Average (\DJI) ended the day slightly above the flatline. The Nasdaq Composite (^IXIC) saw a sell-off on Wednesday, but it rebounded at times during the session and ended the day over 0.6% below the flatline.
Meanwhile, Wall Street’s fears over slowing iPhone demand caused tech giant Apple (AAPL) shares to decline for the fourth day in a row. The large IT company has now dropped nearly 6% over the last five days.
Following the chipmaker’s announcement that it anticipates a nearly 50% decline in first-quarter sales, Mobileye Global’s (MBLY) stock fell around 25%. Before the publication, the stock had increased by about thirty percent in the previous two months.
After releasing its quarterly earnings, Walgreens (WBA) shares experienced a roughly 6% decline. The business said that its dividend will be reduced by 48%, from $0.48 per share to $0.25 per share.
Following the news on Thursday that Peloton (PTON) will be partnering with TikTok to produce short-form workout videos and other content, the company’s stock shot up more than 15%.
On Thursday, travel-related equities saw a rise in trade as oil prices declined, indicating reduced fuel expenses for cruise line and airline operators.
United (UAL), Delta (DAL), and American Airlines (AAL) all had increases of more than 1%. Cruise line companies Carnival (CCL) and Royal Caribbean (RCL) had increases of over 2%.
Earlier in the day, higher-than-expected increases of US distillate fuel and petrol sent oil futures down more than 2%.
Energy-related equities, however, saw some pressure on Thursday. With a loss of about 1%, the S&P 500 Energy Select ETF (XLE) was the sector with the lowest performance.
According to consensus estimates collected by Bloomberg, the Bureau of Labour Statistics’ monthly labour report, which is scheduled for publication at 8:30 a.m. ET, is projected to indicate that nonfarm payrolls increased by 175,000 in December while the unemployment rate marginally increased to 3.8% from the previous month. The US economy created 199,000 new jobs in November, and the unemployment rate unexpectedly dropped to 3.7%.
The report will be a critical litmus test for the year-end rise in the stock market. The shift in opinion among investors, who now believe the Federal Reserve can accomplish a “soft landing”—where inflation retreats to 2% without a total collapse in economic growth—is partly responsible for the surge that propelled equities almost to all-time highs.
Nancy Vanden Houten, chief US economist at Oxford Economics, released a note on Thursday stating, “We expect the December employment report to show slower job growth and a further moderation in nominal wage growth, both something the Federal Reserve wants to see as it attempts to engineer a soft-landing.”
Thursday saw a reversal in oil prices as US distillate fuel and petrol stocks for the previous week indicated decreased demand.
After US crude inventory data was released, West Texas Intermediate (CL=F) fell more than 2% before recovering most of those losses. In addition, Brent (BZ=F) lost its early gains and into negative territory.
According to data from the Energy Information Administration, petrol stocks increased by 10.9 million barrels, marking the largest weekly rise in over thirty years.
For the week ending December 29, crude stocks decreased by 5.5 million barrels; however, the larger-than-expected drawdown may have been caused by US supplies making up for shipment disruptions caused by tensions in the Red Sea.
According to Freddie Mac’s monitoring, the average rate for a 30-year loan increased slightly to 6.62% from 6.61% one week earlier on Thursday. With the exception of the little increase this week, rates have been decreasing for many weeks since the end of October. They have dropped by around 117 basis points from a 12-month high of 7.79% at that time.
Although the recent drops have made it easier for buyers to acquire a house, a persistent dearth of supply, particularly if lower rates rekindle dormant demand, may limit future improvements in affordability.