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U.S. stocks ended sharply lower on Thursday after another unexpectedly hotter inflation report and a decline in jobless claims raised fears that the Fed will continue raising interest rates in its fight to tame soaring inflation. All three major indexes ended in negative territory.
How Did The Benchmarks Perform?
The Dow Jones Industrial Average (DJI) declined 1.3% or 431.20 points to end at 33,696.85 points.
The S&P 500 slid 1.4% or 57.19 points to finish at 4,090.41 points. Consumer discretionary and tech stocks were the worst performers.
The Technology Select Sector SPDR (XLK) lost 1.7%, while the Consumer Discretionary Select Sector SPDR (XLY) fell 2.2%. The Communication Services Select Sector SPDR (XLC) declined 1.5%. All 11 sectors of the benchmark index ended in positive territory.
The tech-heavy Nasdaq dropped 1.8% or 189.86 points to close at 11,855.83 points.
The fear-gauge CBOE Volatility Index (VIX) was up 10.64% to 20.17. Declining issues outnumbered advancing issues by a 2.5-to-one ratio across U.S. markets. A total of 11 billion shares were traded on Thursday, lower than the last 20-session average of 11.7 billion.
Hot Inflation Data Raises Fears
Markets have been volatile over the past few sessions, as economic data released earlier this week suggested that the economy needs to traverse a tough path to bring soaring inflation under control. On Thursday, another round of inflation data showed that the crisis is far from over.
January’s producer price index (PPI) report showed that wholesale inflation increased 0.7% month over month, which was higher than economists’ expectations of a rise of 0.4%. This is also the biggest jump since last summer, indicating that inflation is still quite high and is unlikely to ease soon.
Core PPI, which excludes the volatile food and energy costs, increased 0.5%, the steepest rise in the past 10 months.
Thursday’s reports came just two days after the consumer price index (CPI) report showed that the cost of living rose 0.5% month over month in January. This was followed by solid retail sales data, indicating that spending is still high despite soaring prices.
Economic data released over the week suggest the Fed to continue increasing interest rates for a longer period than expected earlier. This reignited fears of a steeper rate hike by the Fed in its next meeting, sending Treasury yields higher. The high-growth tech stocks suffered the most as a result of this.
The fears of higher interest rate hikes were fueled further following comments from St. Louis Federal Reserve President James Bullard. He said that he had proposed a 50-basis point rate hike in the Fed’s last meeting and such a hike could be expected in the March meeting. Bullard’s sentiments were echoed by Cleveland Fed President Loretta Mester, saying that she also supports a steeper rate hike in the next meeting, which further weighed on stocks.
Economic Data
The Labor Department reported that jobless claims totaled 194,000 for the week ending Feb 11, decreasing 1,000 from the previous week’s revised level of 195,000. The four-week moving average was 189,500, an increase of 500 from the previous week’s revised average of 189,000.
Continuing claims came in at 1,686,000, an increase of 16,000 from the previous week’s revised level of 1,680,000. The 4-week moving average was 1,673,000 an increase of 10,250 from the previous week's revised average of 1,662,750.
In other major economic data released on Thursday, the Commerce Department said that the construction of new homes in the United States declined 4.5% in January to a seasonally adjusted annual rate of 1.31 million.
Also, single-family building permits fell 1.8% to a seasonally adjusted annual rate of 718,000 units. Homebuilding projects with five units or more increased 0.5% in January to a seasonally adjusted annual rate of 563,000 units. Overall, building permits rose 0.1% to a seasonally adjusted annual rate of 1.339 million units.
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Stock Market News for Feb 17, 2023
U.S. stocks ended sharply lower on Thursday after another unexpectedly hotter inflation report and a decline in jobless claims raised fears that the Fed will continue raising interest rates in its fight to tame soaring inflation. All three major indexes ended in negative territory.
How Did The Benchmarks Perform?
The Dow Jones Industrial Average (DJI) declined 1.3% or 431.20 points to end at 33,696.85 points.
The S&P 500 slid 1.4% or 57.19 points to finish at 4,090.41 points. Consumer discretionary and tech stocks were the worst performers.
The Technology Select Sector SPDR (XLK) lost 1.7%, while the Consumer Discretionary Select Sector SPDR (XLY) fell 2.2%. The Communication Services Select Sector SPDR (XLC) declined 1.5%. All 11 sectors of the benchmark index ended in positive territory.
The tech-heavy Nasdaq dropped 1.8% or 189.86 points to close at 11,855.83 points.
The fear-gauge CBOE Volatility Index (VIX) was up 10.64% to 20.17. Declining issues outnumbered advancing issues by a 2.5-to-one ratio across U.S. markets. A total of 11 billion shares were traded on Thursday, lower than the last 20-session average of 11.7 billion.
Hot Inflation Data Raises Fears
Markets have been volatile over the past few sessions, as economic data released earlier this week suggested that the economy needs to traverse a tough path to bring soaring inflation under control. On Thursday, another round of inflation data showed that the crisis is far from over.
January’s producer price index (PPI) report showed that wholesale inflation increased 0.7% month over month, which was higher than economists’ expectations of a rise of 0.4%. This is also the biggest jump since last summer, indicating that inflation is still quite high and is unlikely to ease soon.
Core PPI, which excludes the volatile food and energy costs, increased 0.5%, the steepest rise in the past 10 months.
Thursday’s reports came just two days after the consumer price index (CPI) report showed that the cost of living rose 0.5% month over month in January. This was followed by solid retail sales data, indicating that spending is still high despite soaring prices.
Economic data released over the week suggest the Fed to continue increasing interest rates for a longer period than expected earlier. This reignited fears of a steeper rate hike by the Fed in its next meeting, sending Treasury yields higher. The high-growth tech stocks suffered the most as a result of this.
Shares of Alphabet Inc. (GOOGL - Free Report) declined 1.5%, while Salesforce, Inc. (CRM - Free Report) fell 1.8%. Salesforce has a Zacks Rank #2 (Buy). You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.
The fears of higher interest rate hikes were fueled further following comments from St. Louis Federal Reserve President James Bullard. He said that he had proposed a 50-basis point rate hike in the Fed’s last meeting and such a hike could be expected in the March meeting. Bullard’s sentiments were echoed by Cleveland Fed President Loretta Mester, saying that she also supports a steeper rate hike in the next meeting, which further weighed on stocks.
Economic Data
The Labor Department reported that jobless claims totaled 194,000 for the week ending Feb 11, decreasing 1,000 from the previous week’s revised level of 195,000. The four-week moving average was 189,500, an increase of 500 from the previous week’s revised average of 189,000.
Continuing claims came in at 1,686,000, an increase of 16,000 from the previous week’s revised level of 1,680,000. The 4-week moving average was 1,673,000 an increase of 10,250 from the previous week's revised average of 1,662,750.
In other major economic data released on Thursday, the Commerce Department said that the construction of new homes in the United States declined 4.5% in January to a seasonally adjusted annual rate of 1.31 million.
Also, single-family building permits fell 1.8% to a seasonally adjusted annual rate of 718,000 units. Homebuilding projects with five units or more increased 0.5% in January to a seasonally adjusted annual rate of 563,000 units. Overall, building permits rose 0.1% to a seasonally adjusted annual rate of 1.339 million units.