Despite a partial rebound in the final stages of trading, the top US equity average ended significantly lower on Thursday. A risk rally that lifted the stock earlier in the day hits a stumbling block as another bearish forecast A rise in weekly jobless claims raised concerns about further Fed hawkishness as the labor market remained strong.
The Nasdaq led the decline, down 314.13 points to close at 10,737.51. The S&P 500 lost 78.57 points to end at 3,640.47, while the Dow lost 458.13 points to end at 29,225.61. The S&P reached the 3,610.40 level before bouncing back later in the day.
All 11 S&P sectors finished in the red. Utilities led the retreat, falling more than 4%. Consumer discretionary fell another significant rate, 3%. Energy was the best performer, though it still posted a fractional loss.
Clark Capital’s “A cacophony of doom has converged to bring markets to their knees. S&P 500 bounces back to June lows of 3600 on persistent inflation, rising rates, cursed currency and Fed failure,” Clark Capital’s David Alton-Clark said
“Unfortunately, we may have more downside ahead as earnings need to reset lower, as evidenced by CarMax’s report today and Apple’s downgrade,” he added. “I’d say we still have 10-15% downside in the cards. The S&P 500 has reset to $200 based on earnings and 16 times the historical 100 average S&P 500, which puts us at 3200.”
Elsewhere, Citi reiterated its bullish thesis on the US dollar towards the end of the year. The agency said its forecast was “predicated on liquidity vulnerabilities, policy deviations and US energy sovereignty.”
“We don’t envision a Plaza 2.0,” Citi added, referring to the 1980 Plaza Accord that was intended to weaken the U.S. dollar. “USD positioning looks clear across several metrics, so we think its strength could continue unless the narrative changes.”
On the economic front, USGDP estimates For Q2 was unchanged at -0.6%, while the PCE estimate rose to +7.3% versus the previous estimate of 7.1%.
Moreover, Corporate profit Up 6.2% to $131.6B in Q2.
Turning to the labor market, Initial unemployment claims Hit an 8-month low, as claims fell 16K to 193K from 193K, compared to the 218K figure that was forecast.
Amid market concerns that continued strength in the job market would leave the door open for an aggressive Fed, Pantheon Macro commented, “After 10 weeks undershooting consensus, it’s fair to say that jobless claims did not follow the expected upward track. Many predictors of spring. We weren’t on board with that story, but this week’s numbers are phenomenal.”
The agency added: “Workers are still very hard to find, with companies likely holding on to people who would have been laid off under normal circumstances. At this point, then, the softening of the labor market that the Fed wants seems unlikely to come through “increased layoffs.”
Alliance Bernstein stated In the global macro outlook for the fourth quarter: “Financial markets, high interest rates, low equity prices and wide credit spreads are, unfortunately, part of the solution to the inflation problem. A lot of work has already been done, but we think it’s still premature to call the all-clear.”
Among active stocks, shares of Apple declined after the iPhone maker received a downgrade from BofA on concerns Weak consumer demand.