4:08pm: PacWest shares swoon 20%
The Dow closed Thursday down 221 points, 0.7%, at 33,310, while the Nasdaq Composite added 22 points, 0.2% to 12,329 and the S&P 500 declined 7 points, 0.2%, to 4,131. The small-cap Russell 2000 index dropped 17 points, 1%, to 1,742.
Regional banking fears flared up again Thursday, as shares of PacWest Bancorp tumbled more than 20%. Investors also digested April's PPI figure, which came in at 2.3%, below the expected 2.5%.
“Investor focus is now on both the economic backdrop and liquidity and what’s going on versus rates and inflation,” said Dylan Kremer, co-chief Investment Officer of Certuity. “The PacWest [news] kind of falls into the fragile sentiment from either the regional banking crisis and then the debt ceiling overhang. It’s a combination of the two.”
Meanwhile, Disney shares ended the day 8.7% lower at $92.34 after the company reported a significant loss of Disney+ subscribers.
12.05pm: Disney stock slides on big subscriber losses
US stocks were mixed in noon trading as Disney disappointed and PacWest Bancorp revealed that its deposits fell 9.5% last week
At midday, the Dow lost 236 points to 33,295, while the S&P 500 eased 10 points at 4,128 and the tech-heavy Nasdaq gained 14 points to 12,321.
“It looks like we are back to worrying about regional banks too, with PacWest back in the spotlight,” IG chief market analyst Chris Beauchamp said.
“Jobless claims were up, reinforcing the view that the US economy is beginning to slow,” he added.
Notable movers included shares of The Walt Disney Company (NYSE:DIS), which fell more than 8% after the entertainment giant reported a loss of four million Disney+ subscribers during its second quarter of fiscal 2023.
9:35am: Debt ceiling fears rise as X-date approaches
Stocks were mixed at the open on Thursday as investors weighed up new economic data which shows inflation continues to cool in the US amid rising concerns about the country’s debt ceiling.
The producer price index for the 12 months ended in April came in at 2.3%, below the expected 2.5%, the latest sign that inflationary pressures are easing as a result of the Fed’s aggressive interest rate hikes.
The 2.5% annualized increase in wholesale prices represents the 10th straight slowdown and the smallest figure since January 2021.
At the same time, the US is once again approaching the so-called “X-date,” being the day when the government runs out of money, which could be as early as June 1 according to Treasury Secretary Janet Yellen.
After President Biden’s meeting with congressional leaders on Tuesday failed to produce results, another meeting is on the books for Friday.
“One could almost call the recurring wrangling over the debt ceiling a ritual; in game theory, it is known as the ‘game of chicken’ with two cars driving towards each other,” commented Fisch Asset Management analyst Beat Thoma.
“Both parties hope that the other will yield or swerve first but, if they miscalculate, disaster ensures, so the stakes are high and financial markets are preparing for potential turbulence. The risk of default is still considered a ‘tail risk,’ very unlikely in principle, but market fears are increasing as the deadline approaches.”
Just after the opening bell on Thursday, the Dow Jones had shed almost 200 points or 0.6% at 33,333 points, the S&P 500 was down 10 points or 0.2% at 4,128 points, while the Nasdaq Composite was flat at 12,309 points.
7:55am: A quiet start after yesterday's gains
US stocks are expected to open mixed but still enjoying the lift from softer-than-expected inflation data yesterday which helped fuel expectations of an interest rate reduction in the world's biggest economy or at the least a halt to the current rate hiking cycle.
Futures for the Dow Jones Industrial Average fell 0.3% in pre-market trading, while those for the broader S&P 500 index lost 0.1% and contracts for the Nasdaq-100 were unchanged.
The tech-heavy Nasdaq closed up 1.04% on Wednesday while the S&P 500 rose 0.45% and the Dow Jones Industrial Average slipped 0.09%.
"Yesterday's inflation data was particularly welcome as it supported the narrative of a pause in the Fed's rate hiking cycle at the next meeting," Michael Hewson, chief market analyst at CMC Markets UK.
"Today's April PPI numbers could well reinforce that narrative further, if they continue to slow at the pace we've seen in the past few months. Since the end of last year PPI has fallen from 6.2% in December to 2.7% in March and is expected to slow further to 2.5% today," he added.
The PPI data is due out at 8.30 am ET.
In the background, however, concerns about the US debt ceiling continue to rumble on with no solution at hand so far. President Joe Biden is due to meet with house speaker Ken McCarthy on Friday. Investors are holding on to hope of a last-minute solution.
Contact the author at jon.hopkins@proactiveinvestors.com