Wall Street stocks slid on Thursday as bond yields rallied following a disappointing Treasury auction for investors and Fed Chair Jerome Powell's hawkish-toned speech on inflation.
The S&P 500 (^GSPC) fell 0.8% after the benchmark narrowly notched its eighth straight day of gains on Wednesday — the index's longest in two years. The Dow Jones Industrial Average (^DJI) fell about 0.6% and the Nasdaq Composite (^IXIC) also slipped near 0.9%.
Yields spiked after the 1 p.m. ET auction. The 10-year Treasury yield (^TNX) spiked to 4.62%, about 10 basis points. Meanwhile, the 30-year Treasury yield (^TYX) spiked to 4.8%, about 15 basis points.
Read more: What the Fed rate-hike pause means for bank accounts, CDs, loans, and credit cards
A fresh clutch of corporate reports lies ahead as earnings season winds down. Disney (DIS) shares rose after its after-hours quarterly earnings beat estimates, though they were also likely boosted by a tentative deal between Hollywood studios and striking actors. Other media stocks rallied after the news.
Meanwhile, shares in Arm (ARM) slid as investors digested its first post-IPO results, as well as the $6.2 billion quarterly loss posted by the chip designer's backer SoftBank.
In commodities, oil clawed back some losses after plunging to a three-month low on concerns about global consumption. West Texas Intermediate crude futures (CL=F) and Brent crude futures (BZ=F) added about 0.3% to trade at around $75 and almost $80 a barrel, respectively.
Commentary from Fed chair Powell and rising bond yields weighed on stocks as an eight-day winning streak for the S&P 500 came to a close.
The S&P 500 (^GSPC) fell 0.8% while the Dow Jones Industrial Average (^DJI) slipped 0.6% and the Nasdaq Composite (^IXIC) fell about 0.9%. The S&P 500 had been on its longest stretch of positive trading days since November 2021.
Yields spiked after an afternoon bond auction saw weak demand. The 10-year Treasury yield (^TNX) rose about 10 basis points to 4.63%. Meanwhile, the 30-year Treasury yield (^TYX) spiked to 4.77%, or up about 12 basis points.
Stocks were struggling to extend their winning streak to a ninth-straight day but weren’t clearly remaining on either side of the flat line.
Then demand at a 1p.m. Treasury auction flopped, yields soared and stocks are now clearly in the red sending a stark reminder to investors: The stock market action is still about yields right now.
Over the past week, stocks rallied as yields dropped following an increasing feeling the market that the Federal Reserve may be done hiking interest rates. The 10-year Treasury (^TNX) rose 10 basis points on Thursday to close at 4.63% while the S&P 500 (^GSPC) dropped nearly 1%.
“You’re seeing the negative correlation between bond yields and stocks come back into play,” SoFi head of investment strategy Liz Young told Yahoo Finance when discussing the market rally.
And Thursday, the story was no different. It’s just the direction shifted. Yields shot up and stocks subsequently fell, showing investors that stocks remain beholden to the bond market movements at the moment.
“Yields, in our view, was the biggest challenge for this market.” Truist co-CIO Keith Lerner told Yahoo Finance on Thursday on why the market had rallied.
Speaking about the rally, Lerner was relatively optimistic about where the market could head next but he had one key caveat.
“The market could still have a move higher, as long as yields even stay around where they are now they started moving up to 4.9 or 5%,” Lerner said “That could make the market nervous again.”
It’s 2024 outlook season on Wall Street. And a year after nearly everyone was in agreement about a 2023 recession, the street appears more split this year and its driving different theories on what the Federal Reserve might do with monetary policy.
Wells Fargo economics sees a recession coming in 2024 as the impact of higher interest rates weighs on business investment and the housing market. The team at Wells Fargo believes that will drive more cuts than the market currently expects.
“As economic resiliency gives way to weakness, we look for the FOMC to cut its target range for the federal funds rate by 225 bps by early 2025, which is more than both Fed policymakers and market participants currently project,” Wells Fargo’s team of economists led by Jay Bryson wrote in their 2024 annual outlook.
During a media roundtable call on Thursday, Wells Fargo economist Shannon Seery noted that if the economy does avoid a recession, then the team’s forecast likely has “too much easing” baked in.
That’s exactly what Goldman Sachs predicts in its forecast as the team led by Jan Hatzius still sees just a 15% chance the economy slips into recession in 2024. Goldman Sachs sees strong real household income growth, a smaller-than-expected drag from monetary policy, and a recovery in manufacturing to keep the economy in expansion. The firm sees a 55% chance the Fed follows a higher-for-longer path that includes no cuts through the end of next year or a phase of “gradual cuts” starting in the back half of the year.
The S&P 500 (^GSPC) and Nasdaq Composite (^IXIC) hit fresh lows as Fed Chair Jerome Powell spoke at an International Monetary Fund panel.
Yahoo Finance’s Jennifer Schonberger reports:
Federal Reserve Chair Jay Powell said Thursday that monetary policy is in “restrictive territory” and putting downward pressure on inflation, cautioning that the Fed would not be misled by “a few months of good data.”
Still, he made it clear the central bank is keeping its options for more interest rate hikes on the table, with Powell reiterating in a speech at the International Monetary Fund in Washington that “if it becomes appropriate to tighten policy further, we will not hesitate to do so.”
The Fed chair also emphasized a “meeting by meeting” approach and cautioned on not overreacting to economic data, good or bad. The economy turned in a sizzling performance in the third quarter, growing at an annualized rate of nearly 5%.
“We will continue to move carefully, however, allowing us to address both the risk of being misled by a few good months of data and the risk of overtightening.”
Wall Street stocks slid on Thursday as bond yields rallied following a disappointing Treasury auction for investors.
The S&P 500 (^GSPC) fell 0.2% after the benchmark narrowly notched its eighth straight day of gains on Wednesday — the index’s longest in two years. The Dow Jones Industrial Average (^DJI) and the Nasdaq Composite (^IXIC) both also slipped near 0.2%.
Yields spiked after the 1 p.m. ET auction. The 10-year Treasury yield (^TNX) spiked to 4.62%, about 10 basis points. Meanwhile, the 30-year Treasury yield (^TYX) spiked to 4.8%, about 15 basis points.
The three major averages are roughly flat around 12:30 ET. But digging into the sector action, communications services (XLC) and technology (XLK) continue to be among the leading sectors, attempting to extend the longest winning streak for stocks in two years.
Which stocks lead the way remains key for investors when considering if the rally is sustainable.
Market breadth has been a concern among strategists throughout the 2023 rally as the “Magnificent Seven” tech stocks have produced most of the S&P 500’s gains.
The recent rally showed signs of broadening out, with interest rate sensitive areas of the market like real estate and small caps rallying last week, but those trends have partly reversed in the past three trading sessions.
Technology has once again led the rally, rising more than 7% in the last week, the most of any sector. And as Truist co-CIO Keith Lerner told Yahoo Finance, that brings stocks back to a similar “playbook” that they’ve followed for much of the year.
“I would much prefer to see high beta small caps, financials, act better,” Lerner said. “It just in general is typically a more healthy broad market. And if one area goes down, there’s another area to pick it up.”
Below is a look at the seven-day performance of stocks in the Nasdaq 100 courtesy of the YFinteractive, which clearly shows that once again the Magnificent Seven stocks are helping drive the market action.
AMC (AMC) shares are tanking. And once again, it has to do with investor fears about their shares being diluted.
On Thursday, the movie chain filed to offer up $350 million in stock.
AMC said in the filing that it would use the funds to “bolster liquidity, to repay, refinance, redeem or repurchase its existing indebtedness (including expenses, accrued interest and premium, if any) and for general corporate purposes.”
Shares fell as much as 20% on the news, before paring some of those losses.
AMC shares had already sold off earlier this year over investor fears about share dilution. The stock fell about 20% in September when AMC announced it planned to sell up 40 million shares of stock.
The stock issuance moves on Thursday overshadowed what Wall Street read as an overall positive earnings report on Wednesday night as well as any potential tailwinds from the end of the SAG-AFTRA labor strike.
AMC’s $0.09 loss per share was narrower than the $0.20 loss that the Street had expected while the company’s revenue came in at $1.41 billion, above estimates for $1.26 in revenue.
Hollywood actors reached a tentative agreement with studios on Wednesday to end its 118-day strike — the longest in its history.
Shares of major studios like Warner Bros. Discovery (WBD), Netflix (NFLX), and Comcast (CMCSA), which owns NBCUniversal, traded flat on the news. Paramount (PARA) jumped about 2% while Disney (DIS), which just reported strong earnings, climbed roughly 7% higher.
The details of the deal with the Alliance of Motion Picture and Television Producers (AMPTP), which bargains on behalf of the major studios including Warner Bros., Disney, Netflix, NBCUniversal, Paramount, Amazon (AMZN), Apple (AAPL), and Sony (SONY), have not yet been released. The three-year agreement now heads to the union’s board for approval.
Similar to the writers, which officially ended their strike in October after nearly 150 days, SAG-AFTRA — the union that represents approximately 160,000 actors, announcers, recording artists, and other media professionals around the world — had been fighting for more protections surrounding the role of artificial intelligence in media and entertainment in addition to better pay and higher streaming residuals as more movies and TV shows go directly to streaming.
In a statement, the union said the contract is valued at over $1 billion and includes “‘above-pattern’ minimum compensation increases, unprecedented provisions for consent and compensation that will protect members from the threat of AI, and for the first time establishes a streaming participation bonus.”
Pension and health caps have also been “substantially raised,” along with an “outsize compensation increase for background performers, and critical contract provisions protecting diverse communities.”
“Hollywood is breathing a collective sigh of relief, having reached resolution on the writers and actors strike,” said Scott Purdy, KPMG’s US national media leader. “Protections regarding the use of artificial intelligence will undoubtedly be precedent-setting for the creative industry.”
The “double whammy” work stoppage cost the LA economy an estimated $6.5 billion. That includes the loss of roughly 45,000 entertainment industry jobs.
Read more here.
Stocks moving after quarterly reports are leading the Yahoo Finance trending tickers page today, starting with Disney (DIS). Shares are up more than 6% after the company announced it will step up its cost-cutting efforts while adding more subscribers in the quarter than Wall Street had expected.
Novavax (NVAX) stock gained more than 2% after the company announced plans to cut costs by another $300 million and reported higher revenue than Wall Street had expected.
Arm (ARM) shares were down more than 6% after the company’s first quarterly release since its IPO in September.
Affirm (AFRM) stock rose more than 20% after the company reported quarterly results. The buy now, pay later player topped Wall Street’s estimates revenue and earnings per share while also adding that merchandise volume increased 28% year over year.
Wall Street stocks searched for direction at the open on Thursday, as investors kept an eye on Federal Reserve policymakers for more clues to their interest rate strategy.
The S&P 500 (^GSPC) wavered on both sides of the flatline after the benchmark narrowly notched its eighth straight day of gains on Wednesday — the index’s longest in two years. The Dow Jones Industrial Average (^DJI) and Nasdaq Composite (^IXIC) were also largely unchanged.
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Stock market news today: Stocks slide, snapping longest win streak since 2021, as yields jump – Yahoo Finance
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