Caution remained the predominant attitude on Wall Street during Thursday’s trading, with stocks pushing lower for the second consecutive day. For the S&P 500 and Nasdaq, this represented the fourth lower finish in the past five sessions.
Reviewing the closing numbers, the Nasdaq dropped 120.94 points to finish at 11,789.58, while the S&P 500 dipped 36.36 points to end at 4,081.50. The Dow Jones concluded trading at 33,699.88, a retreat of 249.13 points.
As they did during the previous session, all 11 S&P sectors ended the day in the red. Communication Services led the retreat, falling by 2.8%. Meanwhile, Financials, Materials, Real Estate and Utilities each fell at least 1%.
“The stock market has experienced another decline in momentum, due to the growing realization that the Federal Reserve is not finished with its rate hikes,” analyst Leo Nelissen of BN Capital told Seeking Alpha.
Nelissen explained that stock investors have been “overly optimistic” about a Fed pivot since the latter part of 2022. “It is increasingly unlikely that these expectations will be met,” he warned, arguing that “inflationary pressures are once again on the rise” and “core inflation remains robust, and certain items, such as used cars, are becoming more expensive.”
Nelissen concluded: “In light of these developments, it is our belief that the stock market will continue to exhibit volatility and trend sideways within the range of 3,000 to mid-4,000 points. Financial market participants should prepare for more hawkish comments from both voting and non-voting members of the Federal Reserve, as well as a market that needs to adjust to a renewed upward trend in interest rates.”
Stocks got a boost early on from Disney (DIS) earnings, as the entertainment giant beat expectations with its latest quarterly results. Meanwhile, newly returned CEO Bob Iger announced a massive restructuring that included cutting 7,000 jobs.
However, this initial momentum quickly faded as longer-term concerns overtook the market. The major averages drifted lower through the day, with DIS eventually closing the session in the red as well.
Lately, worries about interest rates and the fate of the economy have weighed on the markets, amid concerns that the Federal Reserve will maintain its hawkish stance longer than previously expected. That macro preoccupation continued to influence trading on Thursday, contributing to the selling.
Looking to the bond market, Treasury yields pushed higher late in the day, overcoming an early dip. The 10-year Treasury yield (US10Y) climbed 5 basis points to 3.68%. The 2-year yield (US2Y) also rose 5 basis points, advancing to 4.50%.
Looking at some of the big movers from the latest round of earnings reports, AppLovin (APP) jumped following the release of Street-beating results and upbeat forecast. Meanwhile, Affirm (AFRM) dropped 17% after releasing a disappointing outlook and announcing massive job cuts.