Tech stocks led a broad decline in stocks on Thursday as Wall Street worried about the Federal Reserve’s hawkish message surrounding its decision to keep interest rates stable.
The S&P 500 (^GSPC) fell 1.1% after losing nearly 1% on Wednesday, and the Dow Jones Industrial Average (^DJI) fell 0.6%. The tech-heavy Nasdaq Composite (^IXIC) fell nearly 1.3% and continued to lead declines.
After reviewing the central bank’s forecast, investors believe policymakers expect interest rates to remain “higher for longer.” The debate is over how long this “extended” period will last, as the central bank announced another rate hike at one of its last two meetings this year. Goldman Sachs has pushed back its forecast for a Fed rate cut to the fourth quarter of 2024.
Read more: What the Fed’s pause on rate hikes means for bank accounts, CDs, loans and credit cards
The prospect of a prolonged period of elevated interest rates has unnerved some investors as it would put pressure on stocks and bonds. The yield on the benchmark 10-year Treasury note rose on Thursday, at one point reaching its highest level in more than 15 years.
However, Fed Chairman Jerome Powell emphasized in his press conference that policy will depend on economic data. Official figures on Thursday showed that jobless claims fell last week to their lowest level since January, the latest sign of strength in the U.S. labor market.
The Bank of England decided on Thursday to keep interest rates unchanged and pause tightening after raising them 14 times in a row following an unexpected slowdown in inflation. There were some surprises at other European central banks: the Swiss National Bank kept interest rates unchanged, while the Norwegian central bank signaled that it could follow September’s hike with another in December.
In individual stocks, shares of FedEx rose after a strong rise in quarterly profit.
Shares are falling in afternoon trading
Wall Street continued to lose ground on Thursday afternoon as investors struggled with hawkish signals from the Fed about extending increased interest rates further in the future.
The S&P 500 (^GSPC) lost 1.1%, while the Dow Jones Industrial Average (^DJI) lost about 0.6%, or 200 points. The tech-heavy Nasdaq Composite (^IXIC) fell about 1.3%.
The unexpected decline in jobless claims is another sign of resilience
The number of Americans applying for unemployment benefits last week fell by 20,000, marking the lowest level since January. This is another sign of a robust labor market even as the Federal Reserve continues its tightening campaign.
According to Labor Department data released Thursday, new jobless claims totaled 201,000, exceeding expectations of 225,000. This was once again a stronger than expected figure given the increased interest rates.
Central bankers are watching closely for signs of weakness in the labor market as they try to reduce historic inflation. The number of jobless claims tends to rise when the economy slows, which can indicate a recession. However, employment numbers have proven resilient in recent months, raising hopes that the Fed’s tightening will not trigger a wave of layoffs or otherwise trigger a widespread economic downturn. On the contrary, Fed Chairman Jerome Powell said Wednesday during a highly anticipated monetary policy press conference that he expects stronger economic activity, which could prompt the Fed to “do more” on interest rates.
The Fed has warned of a stronger-than-expected U.S. economy, and central bankers now forecast the economy will grow 2.1% this year, compared with the 1.0% forecast in June.
Fox and News Corp shares rise after Chairman Rupert Murdoch steps down
Fox (FOXA) and News Corp. investors (NWS, NWSA) appeared pleased after the companies announced Thursday that Chairman Rupert Murdoch had stepped down from his senior roles, marking a career that built a global media empire over seven decades and shaped the modern era the news media. Murdoch’s eldest son Lachlan, who served as co-chairman of News Corp, will become chairman of that company and remain chairman and CEO of Fox.
Lachlan’s ascension has resolved questions about his father’s succession and cemented Lachlan’s role as the new leader of the Empire. Fox shares rose more than 2% in morning trading on Thursday and News Corp gained 0.8%.
“Throughout my professional life I have dealt with news and ideas every day and that will not change. “But it is time for me to take on other roles,” Murdoch wrote in a memo to staff. Murdoch, 92, will be named chairman emeritus of both companies.
Stock trends in morning trading
Here are some of the stocks topping Yahoo Finance’s Trend Ticker page in morning trading on Thursday:
Splunk (SPLK): Shares of Splunk rose more than 20% in morning trading after the AI and data-focused cloud computing company agreed to a $28 billion acquisition by Cisco (CSCO), which fell 3%. The cash offer to buy Splunk for $157 per share meant the deal came at a 30% premium. “For Cisco, this is a shot across the bow of Palo Alto, Checkpoint, Crowdstrike, Microsoft, Zscaler and others, as the tech powerhouse in this market is not sitting idle and is now making aggressive moves to gain market share in the coming years. “,” Wedbush analyst Dan Ives said in a note on Thursday.
FOX (FOXA) and News Corp. (NWS, NWSA): Investors in Fox and News Corp appeared to take heart after the companies announced Thursday that Chairman Rupert Murdoch had stepped down from his leadership roles, ending a career that spanned more than seven decades and a global media empire have built. Murdoch’s son Lachlan will become sole chairman of both boards. The transition resolves questions about Murdoch’s succession and cements Lachlan’s role as the empire’s new leader. Fox shares rose nearly 3% and News Corp rose 0.8%.
Stocks open lower after Fed signals longer tightening cycle
The sour mood on Wall Street continued until Thursday’s opening bell as investors digested the Fed’s hawkish message to keep interest rates higher for longer.
The S&P 500 (^GSPC) lost 0.6%, while the Dow Jones Industrial Average (^DJI) lost 0.3%, or about 100 points. The tech-heavy Nasdaq Composite (^IXIC) fell 0.9%
Broadcom, Klaviyo, Nvidia: Stock trends in premarket trading
Here are some of the stocks topping Yahoo Finance’s Trend Ticker page in premarket trading on Thursday:
Broadcom (AVGO): Shares of Broadcom fell 6% in premarket trading after reports that Google executives discussed leaving the company as an artificial intelligence chip provider as early as 2027.
Klaviyo (KVYO): Shares of Klaviyo fell 3% a day after the marketing automation company’s stock market debut.
Nvidia (NVDA): Shares of the chip giant fell 2% as several interest rate-sensitive stocks suffered a setback following the Fed’s hawkish pause.
FedEx (FDX): Shares of FedEx rose 5%, a day after the company posted a rise in profit that was partly due to acquiring customers from rivals.
KStocks are likely to fall further as the Fed forecast becomes clear
Wall Street stocks appeared to extend losses on Thursday as investors debated how long it might take for Fed policymakers to cut interest rates from their elevated levels.
Futures tied to the Dow Jones Industrial Average (^DJI) lost 0.50%, or 175 points, while S&P 500 (^GSPC) futures lost 0.70%. Nasdaq 100 futures fell 0.92%
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