4:15pm: Federal Reserve’s delay in easing cycle under scrutiny
Markets were spooked by new economic data that indicates the economy may be cooling at an unexpectedly rapid pace.
The S&P 500 fell 1.4%, while the Dow Jones Industrial Average lost 1.2% and the Nasdaq plummeted 2.3%.
The Russell 2000 index, sensitive to interest rates and previously rallying, fell more than 3%.
This decline reflects growing concerns about economic growth and raises questions about the Federal Reserve's decision to delay its easing cycle until September.
“As we get closer to the election, the market has become more volatile, and investors are still worried about growth slowing too quickly and inflation remaining sticky,” Chris Zaccarelli, Chief Investment Officer for Independent Advisor Alliance commented.
“The Fed has been able to orchestrate a soft landing – so far – but that could be in jeopardy if growth slows too quickly, or inflation remains stubbornly high.”
2:00pm: Apple, Amazon earnings on deck
Expectations are high for the latest earnings prints from Amazon and Apple this afternoon.
Previewing the retail giant’s Q2 earnings report after hours on Thursday, Bank of America estimates Amazon's quarterly revenue at $149 billion, slightly above Street expectations. The firm also projects a 1% higher operating profit at $14 billion.
Data suggests upside to 2Q retail estimates, analysts noted, highlighting accelerated growth in online spending based on aggregated credit and debit card data.
Amazon's AWS division is also expected to perform well, with an 18% year-over-year growth estimate, driven by increased consumption spend around model training and strong backlog growth.
As for Apple, Bank of America sees the tech giant is seen topping Wall Street analyst estimates for the fiscal third quarter but investor focus will be on the iPhone maker’s outlook.
Apple is expected to post revenue of $84.5 billion and earnings per share of $1.35 for Q3.
12:05pm: 10-year treasury yield drops below 4%
The 10-year Treasury yield fell below 4% for the first time since February, driven by declining US manufacturing, rising jobless claims, and unexpected drops in construction spending, which raised recession concerns due to high interest rates.
That led markets to reverse course on Thursday afternoon, with the Dow and Nasdaq plummeting over 1% and the S&P 500 losing nearly 0.9%.
"The economy is in pretty good shape in 2024, but it does have weak spots," commented Bill Adams, Chief Economist for Comerica Bank.
"High interest rates are a major headwind for industries that use a lot of credit, like manufacturing, property development, and retailers of big-ticket items like furniture and cars."
11:10am: Qualcomm slips on growth concerns
Qualcomm Inc (NASDAQ:QCOM, ETR:QCI) shares slid on Thursday morning after a post-results rally abruptly ended on fears over the phone market’s recovery.
Shares had spiked after third-quarter results showed that revenue and per-share earnings came in ahead of expectations at $9.39 billion and $2.33 respectively.
However, warnings of muted sales growth ahead from the smartphone processor giant’s leadership team saw the stock retreat from gains to sit 5.6% lower on Thursday morning.
9.48am: Wall Street opens higher
Wall Street has continued to rally for a second day on Thursday, led by earnings from Meta Platforms Inc (NASDAQ:META) that were well received.
The Facebook owner's stock jumped 9%, adding around $100 billion of value.
This helped drive the Nasdaq Composite to a 177-point gain, up over 1% in early trades.
A big faller among the Nasdaq's 100 largest companies was Moderna Inc, which fell 14% after it slashed full-year sales guidance due to lower sales in Europe and the "competitive environment" for respiratory vaccines in the US.
The S&P 500 rose 0.75% and the Dow Jones 0.25%, while the Russell 2000 was flat.
9.15am: Economic data
There's been a bit of macro data this morning, including the usual weekly jobless numbers.
Initial claims rose to 249K, from 235K, above the consensus estimate of 236K.
Continuing claims increased to 1,877K, from a downwardly-revised 1,844K, but also exceeded the consensus forecast of 1,851K.
Productivity data showed growth at an annual rate of 2.3% in the second quarter, above the consensus forecast of 1.8%.
Unit labor costs rose at an annualized rate of 0.9%, well below the consensus, 1.7%.
"US Initial Jobless Claims were worse than expected and the highest in almost a year," says Ryan Brandham, head of global capital markets at Validus Risk Management.
"This series is finally starting to trend higher and perhaps forecasts some weakness in the US labour market.
"As the Fed yesterday flagged a shift towards focusing on both goals of their dual mandate, not just prioritising inflation, any weakness in employment would bolster the case for a cut at the September meeting, which is already fully priced by markets."
As for the quarterly productivity numbers, they are "so volatile that any one data point should be treated with caution", says Oliver Allen at Pantheon Macroeconomics.
"Nonetheless, this report contains some encouraging signs. The 2.3% increase in Q2 meant that the year-over-year rate ticked down only slightly, to 2.7% from 2.9%, and the big picture is that productivity growth continues to run comfortably above the path implied by the pre-Covid trend".
"Further strong productivity gains will probably be harder to come by in the short term, because underlying business equipment investment—i.e., excluding the volatile transportation and IT categories—has been weak over the past year or so, growing by just 0.5% in Q2 compared to a year earlier.
"We remain upbeat about the medium-term outlook for productivity, however, given the vast sums of money currently being poured into AI infrastructure," he says.
8.55am: Nasdaq rally expected to continue
Whatsapp and Instagram owner Meta Platforms is expected to lead a continuation of the big tech rally on Thursday, the first day of August.
S&P 500 and Nasdaq 100 futures both were up 0.4% ahead of the open, with Dow Jones futures rising 0.1% and those for the small- and mid-cap Russell 2000 rising 0.2%.
This followed strong gains the previous day, and a mixed July.
The past month saw the Nasdaq Composite index fall 1.6%, while the S&P 500 rose 0.9%, the Dow Jones rose 4.3% and the Russell 2000 leaped over 11%.
Premarket trading in Meta stock pointed to a 9% gain for the Facebook parent, but other big tech names mixed on Thursday.
Meta's second quarter financial performance topped analyst estimates for the top and bottom lines, with CEO Mark Zuckerberg saying the company's artificial intelligence systems are "on track to be the most used AI assistant in the world by the end of the year".