US stocks faltered on Thursday as optimism about declining inflation and a change in Federal Reserve policy faded, while Wall Street surveyed a variety of corporate earnings.
The S&P 500 (^GSPC) was down 0.3% after breaking out of a session low of more than 1%, while the Dow Jones Industrial Average (^DJI) was down around 0.1%, paring a loss. of more than 300 points. The technology-focused Nasdaq Composite (^IXIC) was down 0.2%.
Comments from St. Louis Fed Chairman James Bullard weighed on investor sentiment early Thursday as he suggested the Fed’s tightening campaign has so far had “limited effects” on inflation. observed and that even a “dovish” policy from here would need to raise the fed funds rate by at least another percentage point.
Investors are in for a prolific Fedspeak day, with several Fed policymakers scheduled to give public comments across the country on Thursday.
In the economic data spotlight, jobless claims fell last week, holding near record lows even as a surge of tech companies report layoff plans. Initial jobless claims, the most timely snapshot of the labor market, reached 222,000 for the week ending Nov. 12, a 4,000 decrease from the previous week, Labor Department data showed Thursday.
A recent uptrend in stock markets ran out of steam on Wednesday after strong October retail data offset hopes for a change in central bank policy, recently revived by a series of softer inflation reports. A loss of Target earnings also weighed on sentiment in Wednesday’s session, with the company citing inflation and a deteriorating economic backdrop ahead of the key holiday shopping season.
Other industry peers fared better during the period.
Macy’s (M) shares rose more than 7% at the open after the department store giant beat estimates and raised its full-year profit guidance, buoyed by strong demand in luxury areas of its business. Meanwhile, Kohl’s (KSS) beat earnings expectations but withdrew its full-year outlook due to “significant” macroeconomic headwinds and the unexpected transition of its chief executive. Shares fell nearly 3% to open the session.
Bath & Body Works (BBWI) shares soared 26% at the start of trading after the personal care and home fragrance maker raised its full-year earnings outlook. Retailers Walmart (WMT), Lowe’s (LOW), Home Depot (HD), all beat analyst estimates.
Separately, as earnings season comes to a close, Nvidia (NVDA) CEO Jensen Huang said strong demand for chips will help the company weather potential economic challenges, an assurance that it was enough to offset the losses in his gaming business. Shares fell 1%.
Machine maker Cisco Systems (CSCO) posted a stock rally of 3% after the company presented a positive earnings outlook and said it was cutting its workforce and reducing office space.
Meanwhile, in Washington, DC, Republicans won a majority in the House of Representatives on Wednesday, resulting in a division of control of the US Congress, a positive sign for investors as stocks have historically been they have fared better in times of political stalemate.
Still, strategists have asserted that inflation and economic conditions remain the focus of the markets. Principal Asset Management global strategy director Seema Shah said the result should be “largely irrelevant to the overall market outlook.”
“Instead, it is historically high inflation, the Fed’s inflationary response and the resulting recession risk, along with key structural policy decisions, that will determine the direction of the market.”
On that front, the president of the Federal Reserve Bank of San Francisco, Mary Daly, said in an interview with CNBC that a rate pause is not currently an option, although she indicated that the fed funds rate may reach the range of 4.75%-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 projecting a 0.50% rise next month, added an additional quarter-point rise in May 2023 to its outlook, 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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