NEW YORK (AP) — December 13, 2024 — U.S. stocks experienced a pullback on Thursday as a pair of economic reports raised concerns about the strength of the recovery, causing Wall Street’s recent rally to lose momentum.
The S&P 500 dropped 0.5%, marking its fourth decline in the past six trading sessions, signaling a pause in what had been one of its strongest years in recent history. The Dow Jones Industrial Average fell 234 points, or 0.5%, while the Nasdaq Composite retreated 0.7% after reaching a record high just a day earlier.
The day’s losses were fueled by disappointing data that hinted at potential economic challenges. Initial jobless claims for the week came in higher than expected, suggesting softening in the labor market. Additionally, wholesale inflation data for November exceeded economists’ expectations, pointing to persistent price pressures before goods reach consumers.
Though neither report signals an immediate economic downturn, they dampen optimism that inflation is easing enough to allow the Federal Reserve to continue lowering interest rates. This hope had helped propel the S&P 500 to 57 all-time highs so far this year, as investors anticipated that the central bank’s rate cuts would support economic growth while keeping inflation under control.
According to Chris Larkin, managing director of trading and investing at E-Trade, the labor market report may have a more significant impact on investor sentiment than the inflation data. He noted that while one week of higher-than-expected claims doesn’t overturn the overall trend of a robust job market, the Fed is likely to remain vigilant about any signs of weakness in employment.
“There is concern that any slowdown in job growth could prompt the Fed to adjust its policy stance,” Larkin said. “Inflation, while still a worry, remains manageable for now, but the labor market is key.”
Despite the setbacks, traders are still largely expecting the Fed to announce another interest rate cut at its upcoming meeting next week, following two previous reductions in September and October. Such a move would mark the third consecutive rate cut aimed at mitigating the effects of a cooling job market while keeping inflation near the central bank’s 2% target.
The Federal Reserve’s potential rate cuts align with actions from other central banks. The European Central Bank lowered its benchmark rate by 0.25 percentage points on Thursday, in line with market expectations. Similarly, the Swiss National Bank cut rates more aggressively, slashing its policy rate by 0.5 percentage points.
On Wall Street, notable stock moves included a significant drop in Adobe shares, which plunged 13.7% despite the company reporting stronger-than-expected profits for the latest quarter. Adobe’s disappointing guidance for the upcoming fiscal year spooked investors, leading to a sharp decline in its stock price.
In contrast, Warner Bros. Discovery surged 15.4% after announcing a new corporate structure aimed at separating its streaming and film divisions from its traditional television business. CEO David Zaslav suggested that the move could unlock strategic opportunities, fueling speculation about a potential spinoff or sale of some assets.
Grocery giant Kroger saw a 3.2% increase in its stock price after announcing that it would resume stock buybacks, now that its planned merger with Albertsons has been called off. Kroger’s board approved a new repurchase program worth up to $7.5 billion.
By the close of trading, the S&P 500 had fallen 32.94 points to 4,051.25, the Dow Jones Industrial Average dropped 234.55 points to 43,914.12, and the Nasdaq Composite declined 132.05 points to 19,902.84.
Global Market Update
International markets showed mixed results. European stocks held steady following the European Central Bank’s rate cut, while Asian markets posted gains. Hong Kong’s Hang Seng Index rose 1.2%, and China’s Shanghai Composite gained 0.8%, as Chinese officials gathered in Beijing to outline their economic strategy for the coming year. South Korea’s Kospi Index also climbed 1.6%, extending its recent rally despite political tensions earlier in the week.
In the bond market, the yield on the 10-year U.S. Treasury bond rose to 4.33%, up from 4.27% on Wednesday, as investors weighed the latest economic data and the prospect of continued Fed rate cuts.
As Wall Street contemplates the future direction of interest rates and inflation, markets remain sensitive to any signs of economic slowdown, with particular focus on labor market trends and inflationary pressures.
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