4.07pm: US stocks head south
US markets headed downwards once again wiping out most of yesterday’s gains as investors continued to fret that the Federal Reserve's aggressive fight against inflation could hobble the US economy and also worried about a rout in global currency and debt markets.
By the close the Dow Jones Industrial Average was 458 points, or 1.54% lower, at 29,226, the S&P 500 eased 79 points, or 2.11%, to 3,640 and the tech-heavy Nasdaq Composite slid 314 points, or 2.84% to 10,738.
Even good news was taken badly by the market as data showing the number of Americans filing new claims for unemployment benefits fell to a five-month low last week as the labor market remains resilient despite the Fed's rate hikes.
"Good news is bad news in that today's job number again reiterates that the Fed has a long way to go," said Phil Blancato, head of Ladenburg Thalmann Asset Management in New York. "The fear in the marketplace is that the Fed is going to push us into a very deep recession, which will cause an earnings recession, which is why the market is selling off."
Notable movers included shares of Apple Inc, which slid about 5% after Bank of America analysts downgraded shares of the consumer electronics giant to ‘Neutral’ from ‘Buy’, while cutting its target price due to what it perceived as weaker consumer demand for the iPhone maker’s products.
12.05 pm: Nasdaq sinks nearly 3% as Apple stock drops
US stocks fell sharply in noon trading as recession worries weighed on investor sentiment and an analyst downgrade hit shares of Apple Inc.
At midday, the Dow fell 346 points to 29,338, while the S&P 500 eased 64 points at 3,656 and the tech-heavy Nasdaq slid 286 points to 10,766.
“For a more sustained rally, investors will need to see convincing evidence that inflation is coming under control, allowing central banks to become less hawkish,” UBS’ Mark Haefele wrote in a note.
Notable movers included shares of Apple Inc, which slid about 5% after Bank of America analysts downgraded shares of the consumer electronics giant to ‘Neutral’ from ‘Buy’, while cutting its target price due to what it perceived as weaker consumer demand for the iPhone maker’s products.
9.35am: Hurricane Ian puts travel stocks under pressure
US stocks were unable to sustain yesterday’s rally at the open on Thursday amid continued concerns around the economic outlook, including rising recession fears.
Shortly after the market opened, the Dow Jones Industrial Average had dipped 233 points or 0.8% at 29,451 points, the S&P 500 was down by 39 points or 1% at 3,680 points, and the Nasdaq Composite had slid by 157 points or 1.4% at 10,895 points.
After reporting another batch of disappointing quarterly results before the bell, including a net loss of $366.2 million or $4.59 per share, embattled home goods company and meme stock Bed, Bath & Beyond Inc had slipped by 2.2%.
Apple Inc shares were down 2.3% after the Bank of America downgraded the stock from ‘Buy’ to ‘Neutral,’ citing the expected fall in discretionary spending.
After soaring more than 9% yesterday thanks to a double upgrade by Wall Street analysts citing the platform’s ad tier potential, Netflix Inc was down about 1.3% at the open.
Travel stocks were also under pressure following cancellations caused by Hurricane Ian, which made landfall in Florida yesterday afternoon causing floods and power outages, with American Airlines Group Inc down 2.4%, Delta Air Lines Inc 2.5%, and Carnival Corporation & plc 3.2%.
Forex.com market analyst Fiona Cincotta noted that US stocks were headed southwards, back towards the year-to-date lows after gains in the previous session.
“Higher US treasury yields, inflation, and rising recession fears are back in the driving seat,” she wrote in a note. “Federal Reserve officials have been clear that interest rates need to keep rising and will stay higher for longer than previously thought, raising the risk of recession.”
Meanwhile, initial jobless claims for the week ended September 24 fell to their lowest level since April coming in at 193,000, a 16,000 decrease from the previous week’s revised level of 209,000.
This was far below the consensus analyst expectation per Bloomberg of 215,000, highlighting the continued tightness in the US labor market.
6.30am: Shortlived rally?
US stocks are expected to open lower on Thursday as yesterday’s rally, sparked by a recovery in bond prices, looks set to fizzle out amid prevailing concerns about the gloomy prospects for the global economy.
Futures for the Dow Jones Industrial Average were down 0.6% in pre-market trading, while those for the S&P 500 shed 0.7%, and contracts for the Nasdaq-100 were 0.9% lower.
Trading is expected to be volatile with investors spooked by sharp fluctuations in the currency and bond markets, mainly driven by the British pound’s steep falls after the government’s mini-budget last week.
The UK central bank’s intervention in the sovereign bond market on Wednesday helped shore up bond prices and the British currency, in turn helping 10-year US Treasury yields pull back after surging past 4% for the first time since 2008.
“The surprise intervention from the BoE (Bank of England) gave an energy boost to the markets yesterday, proving once again how the markets are addicted to the central bank money, and how they are depressed without it,” said Ipek Ozkardeskaya, senior analyst at Swissquote Bank.
“There is still a chance that the BoE’s bond-buying is not enough, and that we see a surprise rate hike before the November 3 meeting. But at this point, the BoE can no longer let the British sovereigns, and the pound sink further,” she added.
The S&P500 index gained almost 2% yesterday to rise above the 3,700 level, while Nasdaq jumped more than 2%.
“Will the enthusiasm last? Not so sure. Yesterday’s price action was a sugar rush, triggered by the BoE intervention. Enthusiasm will likely fall as the level of blood sugar falls across the financial markets,” Ozkardeskaya warned.
Separately, floods and power outages in Florida caused by Hurricane Ian are also adding to investor concerns.
US stocks have been under pressure since the middle of last week after the Federal Reserve delivered its third straight 75 basis point interest rate increase and signaled that it will continue raising rates to tackle runaway inflation.
On the data front, investors will be watching initial jobless claims figures for signs of whether the labor market is softening. Quarterly earnings from the likes of Nike Inc (NYSE:NKE), will also be in focus.
Contact the author at jon.hopkins@proactiveinvestors.com