4.10pm: US markets wary ahead of non-farm payrolls
US markets failed to shake off the effects of yesterday’s hawkish statement from Federal Reserve chair, Jerome Powell, and posted a fourth consecutive day of falls with investors wary of taking positions of tomorrow’s job data.
At the close the Dow Jones Industrial Average was down 147 points, or 0.46%, to 32,001, the S&P 500 slipped 40 points, or 1.07%, to 3,720 and the Nasdaq Composite declined 182 points, or 1.73%, to 10,343.
Economic data today showed the jobs markets remained solid and traders feared that another strong non-farm payrolls print tomorrow could send equities south again heading into the weekend.
Markets were still feeling the pain of yesterday’s rout which followed comments by Fed chair, Powell, who said it was “premature” to discuss a rate hike pause.
“The post-Fed hangover continues to keep pressure on US stocks as the impact from the first round of hikes is finally being felt,” Oanda senior market analyst Ed Moya told CNBC.
“Stocks aren’t going to have a painful death here, but they will soften until markets price in a little more Fed hawkishness.”
Disappointing results hit shares in Qualcomm Inc. which fell 7.7%, Fortinet Inc. which slumped 15.3% and Roku Inc. which tumbled 7.1%.
12.05pm: US markets go from bad to worse
The major US indices were in the red at noon, trending lower following a big plunge in the aftermath of the US Federal Open Market Committee’s fourth consecutive 75 basis point rate increase on Wednesday.
At midday, the S&P 500 was down by 0.9% at 3,726, the Nasdaq Composite was down by 1.4% at 10,380, while the Dow Jones was down by 0.4% to 32,034 points.
Fawad Razaqzada, a market analyst with StoneX, said there are signs of weakening economic data today, which is not great for businesses and company earnings.
“In the past, the ‘bad news = good news for stocks’ equation used to trigger a positive response in stock prices," Razaqzada wrote in a report.
"But this no longer applies, because of the very high levels of inflation preventing the Fed from pivoting to a dovish stance. As (Federal Reserve chair Jerome) Powell made it clear yesterday, the Fed expects to raise interest rates even higher than previously expected – because of inflation remaining stubbornly high and employment remaining strong."
He wrote that while the Fed continues to remain very hawkish, a growing number of central banks are starting to pivot to a less hawkish stance.
“Today saw the Bank of England deliver the opposite message,” Razaqzada wrote, citing the UK’s central bank increased its interest rate to 3% from 2.25%.
He also noted that thanks to the hawkish Fed and weak macro data, the S&P has broken out of a rising wedge pattern. The Nasdaq is also down over 7% since Tuesday’s pre-market peak.
“Despite its name, this is meant to be a bearish continuation pattern,” Razaqzada wrote. "When the market breaks the support trend line, the longer-term bearish trend tends to resume. The S&P has also broken below last Friday’s big bullish candle, thus taking out some of the bulls who had placed their stops below the low of that day’s candle."
The biggest movers midday included Etsy, up over 14%, Pinduoduo up over 7%, while Boeing rose by 6.7%.
On the downside, insurance and retirement company Lincoln National dropped by 31.8%, hitting a new 52-week low, followed by tech solutions company Fidelity National, down by 22.4%.
9.35am: Stocks struggle after Fed’s rate decision
US stock started the day lower on Thursday following the Fed’s 75 basis point interest rate hike yesterday, and accompanying comments from Fed chair Jerome Powell that it would be “very premature to talk about pausing rate hikes.”
Shortly after the market opened, the tech-laden Nasdaq Composite had shed 108 points or 1.1% at 10,417 points, with big tech stocks struggling to make gains following the Fed’s decision, adding to pressure from a slew of disappointing quarterly results from the likes of Alphabet, Meta, and Amazon.
The S&P 500 was down 40 points or 1% at 3,720 points and the Dow Jones Industrial Average had slipped 224 points or 0.7% at 31,924 points.
In terms of major movers, Moderna Inc plunged 3.9% at the open after the pharmaceutical company missed on both revenue and earnings expectations for 3Q and lowered its 2022 sales outlook.
Fitness equipment maker Peloton Interactive Inc also sunk about 15.2% on another weak outlook.
Streaming provider Roku tumbled 15.5% as the softer advertising market impacted the company’s 3Q earnings, with it downgrading its 4Q forecast.
6.30am: Fed sell-off continues
US stocks were seen opening lower on Thursday, extending the previous session's drop which followed mixed signals from the Federal Reserve on future interest rate hikes following Wednesday's, as expected, 75 basis point increase.
Futures for the Dow Jones Industrial Average were down 0.4% in pre-market trading on Thursday, while contracts for the S&P 50 and the Nasdaq-100 were both 0.5% lower.
On Wednesday, the Dow Jones dropped by more than 500 points, or 1.6%, while the S&P 500 finished down 2.5% and the Nasdaq Composite shed more than 3.3% as traders digested the Fed's accompanying statement and then comments at a press conference by its governor, Jay Powell.
Neil Wilson, senior analyst at Markets.com noted: "Market reaction was initially positive for risk, with the following line in statement regarded as dovish: “In determining the pace of future increases in the target range, the Committee will take into account the cumulative tightening of monetary policy, the lags with which monetary policy affects economic activity and inflation, and economic and financial developments.” It very clearly (said) that the Fed wants to slow down a bit to see what it’s done so far.
"In the presser, Powell said that at some point it will become appropriate to slow pace of hikes, and that point may come as soon as December. But then he started to sound hawkish. There was a very clear reaction in the market to Powell saying “data since our last meeting suggests that the ultimate level of interest rates will be higher than expected”.
"So, a higher terminal rate, and higher for longer seemed to be the message. In other words, we will down slow but no pivot, Powell stressing the “need for ongoing rate increases...ground left to cover ... it is very premature to be thinking about pausing". Markets ultimately took it as hawkish and risk took a hit."
With the rate move out of the way, traders will now focus back on economic fundamentals, notably Friday's US October non-farm payrolls report, with the ADP private payroll numbers yesterday surprising good.
Ahead of that comes the latest weekly unemployment claims data today, plus the latest US ISM services PMI survey.
Earnings due today come from Barrick Gold, Moderna, Amgen, Block Inc, Coinbase, Illumina, PayPal, Starbucks, Twilio, Virgin Galactic.
Contact the author at jon.hopkins@proactiveinvestors.com