4:12pm: Wall Street ends losing session
Wall Street retreated on Thursday as fresh inflation data dampened investor enthusiasm and raised questions about the Federal Reserve's future interest rate decisions.
All three major indices closed lower, halting the momentum from the recent post-election rally.
The Dow Jones fell 0.5% to close at 43,914 points. The S&P 500 declined 0.5%, ending the session at 6,051, and the tech-heavy Nasdaq shed 0.7% to finish at 19,903, retreating from its recent milestone of surpassing 20,000 for the first time.
As the Federal Reserve's final meeting of the year approaches next week, investors remain cautious about the central bank's future direction. The unexpected rise in wholesale prices has shifted attention to the possibility of the Fed maintaining higher interest rates for longer than previously anticipated.
3:25pm: Adobe shares deep in the red
Bank of America has reduced its price objective on Adobe following its lackluster Q4 results released after the bell Wednesday.
Adobe's shares were down around 13.1% on Thursday afternoon after the company reported mixed quarterly results and a disappointing outlook.
The software company's fourth quarter "wraps up a year of delayed gratification for AI," analysts at Bank of America wrote.
"The bearish view is that competitive pressure from large language models, Canva and Figma is capping growth. Marginalization by these vendors is possible, given that they address faster growing segments such as user interface / user experience (UI/UX) and social media," analysts wrote.
:However, we do not believe replacement is occurring. Engagement metrics like 4 billion Firefly images in Q4 are promising and likely to lead to some reacceleration as we move through the year from better upsell and cross sell."
The bank lowered its PO to $605 from $640.
2:30pm: Oil price steadies further
"Oil and precious metal prices gave back recent gains - silver falling by over 3% - as the US dollar appreciates ahead of next Wednesday Federal Open Market Committee Meeting (FOMC)," says Axel Rudolph, Senior Technical Analyst at online trading platform IG.
"According to the CME FedWatchTool, 98% of respondents anticipate a 25 basis point rate cut to 4.25%-to-4.50%, 10% more than just a few days ago."
1:05pm: Tech leads decline
Stocks were still down at the start of afternoon trading Thursday as investors react to stronger-than-expected inflation data and prepare for the Federal Reserve's upcoming interest rate decision.
The Dow Jones is down 0.2% at 44,046, the S&P 500 has dropped 0.2% to 6,072, and the Nasdaq is also down 0.2%, trading at 19,989.
The recent Producer Price Index (PPI) report indicated a 0.4% increase in wholesale prices for November, surpassing expectations and raising concerns about inflation's impact on monetary policy.
In corporate news, shares of Adobe are falling sharply following a disappointing revenue guidance for its fiscal first quarter, contributing to a pullback in the tech sector. Investors are also closely watching upcoming earnings reports from Broadcom and Costco, set to be released after the market close today.
Despite today's downturn, market participants remain optimistic about potential interest rate cuts from the Federal Reserve next week, with a nearly 99% probability of a quarter-point reduction indicated by the CME FedWatch tool.
11:48am: Warner Bros surges on restructuring plan
Warner Bros Discovery Inc (NASDAQ:WBD, ETR:J5A)’s stock soared over 16% on Thursday after the company unveiled a new corporate structure aimed at enhancing strategic flexibility and unlocking shareholder value.
The restructuring divides the company into two distinct divisions: Global Linear Networks, focusing on profitability and cash flow to reduce debt, and Streaming and Studios, targeting growth and robust returns on invested capital.
The changes are expected to be implemented by mid-2025, the company said.
“This new structure should give the company more flexibility for future strategic actions, such as a spin,” Bank of America analysts said in a note.
10:55am: Relief in November PCE inflation
Bank of America analysts forecast a modest increase of 0.1% month-over-month in November's core and headline Personal Consumption Expenditures (PCE) inflation, based on recent CPI and PPI data. This would mark a slowdown from the 0.3% increases seen in September and October, offering welcome news for the Federal Reserve.
The report predicts the year-over-year core PCE rate will hold at 2.8%, while headline PCE inflation is expected to rise 2.4% annually. Analysts believe this slowdown supports their expectation that the Fed will cut rates at its December meeting, followed by additional cuts in March and June 2025, bringing the terminal rate to 3.75%-4.00%.
However, the long-term outlook remains uncertain, with progress on inflation stalling and risks of upward price pressures looming. Bank of America suggests the Fed may adopt a more cautious approach to rate cuts in 2025, moving to a quarterly schedule instead of reducing rates at every meeting.
9.41am: Wall Street drops at open
Wall Street faced a negative start as trading got underway on Thursday in the wake of both higher-than-expected producer price index and weekly jobless claims figures.
The Nasdaq dropped 0.4% after the bell, while the S&P 500 slipped 0.3% and the Dow Jones moved just below the mark.
Both the S&P 500 and Nasdaq had surged on Wednesday as in-line consumer price index data for November boosted hopes for a rate cut by the Federal Reserve next week.
Thursday’s producer price index reading then came in ahead of expectations at 0.4% over the month though, while initial jobless exceeded anticipations of 220,000 at 242,000.
8.56am: Jobless claims above expectations
The number of people applying for unemployment benefits in the US exceeded expectations and hit a two-month high last week.
Some 242,000 jobless claim applications were made over the week to December 7, up by 17,000 and ahead of the 220,000 expected.
Initial claims were at their highest since October as a result, while the four-week average climbed 6,000 to 224,250.
8.38am: Producer inflation overshoots expectations
US producer prices grew more rapidly than expected in November, figures showed on Thursday.
According to the US Bureau of Labor Statistics, the producer price index climbed by 0.4% month on month, ahead of expectations for a 0.2% uptick.
On an annual basis, the index climbed by 3% in the largest rise since February and compared to expectations for a 2.6% uptick.
Futures continued to point to a negative start on Wall Street following the figures.
7.00am: Negative start seen
Wall Street appeared on course to fall back after Wednesday’s in-line inflation reading and subsequent surge in rate cut bets sent the Nasdaq above 20,000 for the first time.
Futures had the Nasdaq falling 0.3% ahead of Thursday’s opening bell, while the S&P 500 and Dow Jones were seen down 0.2% each respectively.
After Wednesday’s confirmation that the consumer price index climbed as expected by 2.7% in November, attention was set to be on Thursday’s producer price index reading.
“This [...] has significantly influenced market sentiment, leading many to believe that the Federal Reserve is likely to implement a rate cut during their upcoming meeting on December 18,” Tickmill Group partner Patrick Munnelly commented.
“The anticipation surrounding these economic indicators reflects the ongoing concerns about inflation and the overall health of the economy, as investors and analysts closely monitor the Federal Reserve's actions and decisions.”