Stock losses accelerated in mid-morning trading as investors digested the impact of Big Tech’s disappointing earnings reports combined with rising bond yields.
The tech-heavy Nasdaq (^IXIC) led the declines, down about 1.2%, while the S&P 500 (^GSPC) lost about 0.7%. The Dow Jones Industrial Average (^DJI) fell 0.4%, or more than 130 points.
Tech stocks remain under pressure after posting their worst daily performance in eight months on Wednesday. Concern is growing that valuations are too high in a world of rising Treasury yields.
On Thursday, the benchmark 10-year Treasury yield (^TNX) fell 5 basis points to near 4.90% after positive recent GDP readings and the U.S. economy grew at its fastest pace in nearly two years .
The Bureau of Economic Analysis’ preliminary estimate of U.S. gross domestic product (GDP) in the third quarter showed the economy grew 4.9% on an annual basis. faster than consensus forecasts in the reporting period.
The strong data comes despite the Federal Reserve’s mantra of keeping interest rates higher and longer, which has failed to rein in the American consumer. The Fed’s next interest rate decision is scheduled for November 1st
Read more: What the Fed’s pause on rate hikes means for bank accounts, CDs, loans and credit cards
Other central banks are starting to change their monetary policy. On Thursday, the European Central Bank kept interest rates stable for the first time in over a year after making 10 straight rate hikes.
The ECB said it would keep its deposit rate at a record high of 4%. The bank maintained its previous forecast of stable policy going forward.
AOil drops to hot GDP, Middle East conflict
Oil prices fell on Thursday as better-than-expected GDP results that showed the U.S. economy grew 4.9% on an annual basis in the latest quarter, coupled with the ongoing conflict in the Middle East, boosted investor expectations The Federal Reserve will continue to commit to higher interest rates.
As Yahoo Finance’s Ines Ferré reports:
Brent (BZ=F) fell more than 1% to trade above $88 a barrel in midday trading. West Texas Intermediate (CL=F) also fell as much as 3% in the session before paring losses to trade above $84 a barrel.
“The Fed’s job is not done,” Quincy Krosby, chief global strategist at LPL Financial, said in a note to investors Thursday morning.
“While the market does not expect a rate hike at next week’s Fed meeting, there are concerns that the Fed could indicate that it will have to raise rates again before the end of the year if inflation does not ease more quickly and if the economy continues to weaken defying expectations of a slowdown,” she added.
On Thursday, the US Dollar Index (DX-Y) rose, which also put pressure on crude oil prices and the broader markets in general. Oil is denominated in dollars.
Crude oil traders are also selling amid speculation that the war between Israel and Hamas may remain contained as diplomatic efforts continue in the region to delay a much-anticipated ground invasion of the Gaza Strip.
Read more here.
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Stocks extend losses, led by Nasdaq
Stock losses accelerated, with the tech-heavy Nasdaq Composite (^IXIC) falling 1.2%, followed by the S&P 500 (^GSPC) falling about 0.7%. The Dow Jones Industrial Average (^DJI) fell 0.4%.
The benchmark 10-year yield (^TNX) fell 5 basis points to near 4.90% after recent GDP readings turned positive and the U.S. economy grew at its fastest pace in nearly two years.
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Executive restructuring on Wall Street
Longtime Morgan Stanley (MS) veteran Ted Pick will succeed CEO James Gorman in early 2024 – ending the high-profile search for a successor.
In May, Morgan Stanley announced that Gorman would step down and select his successor from one of the bank’s three major department heads.
Following the announcement, shares rose more than 1% on Thursday.
As David Hollerith of Yahoo Finance reports:
Pick, 54, has been with Morgan Stanley for 33 years and currently heads the firm’s institutional securities division, which oversees investment banking and trading. Previously, he was global head of sales and trading, where he led the turnaround in the fixed income trading division.
Andy Saperstein and Dan Simkowitz, two other Morgan Stanley executives considered candidates for the job, also received new titles and responsibilities.
Saperstein, who was co-president alongside Pick, will retain his co-president title and also become head of wealth and investment management. Simkowitz will also receive the title of co-president and become head of institutional securities. Gorman, 65, will become chairman of the board.
The transition ends the tenure of one of Wall Street’s longest-serving CEOs. Gorman took over the company in 2010 as the company faced questions about its survival following the 2008 financial crisis.
Read more here.
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Ford and UAW reach tentative deal
Ford (F) and the United Auto Workers (UAW) agreed to a tentative collective bargaining agreement late Wednesday, a sign that the auto strike, now the longest in 25 years, may be nearing its end.
Ford shares were flat in early trading Thursday following the news.
As Yahoo Finance’s Pras Subramanian reports:
The UAW said the tentative agreement calls for a 25% increase in base wages through April 2028 and will increase overall top wages by more than 30% to more than $40 an hour and starting wages by 68% to more than $28 an hour increase. Ford’s lowest-paid workers will receive a raise of more than 150% over the life of the agreement, with some workers receiving an 85% raise immediately after ratification.
The UAW also announced that the cost of living allowance (COLA) provisions have been reinstated, along with a new three-year wage increase scale (previously it was eight years) and the end of pay scales. The union said it secured gains for workers with pensions and 401(k) plans, but did not provide specific details.
The deal still requires approval by the UAW’s National Ford Council and ratification by a simple majority of the UAW’s 57,000 Ford workers.
Read more here.
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When the market opens, stocks fall
Stocks opened lower, with the tech-heavy Nasdaq Composite (^IXIC) the biggest loss leader of the early morning session, down about 0.5% following disappointing tech gains. The Dow Jones Industrial Average (^DJI) fell 0.1%, while the benchmark S&P 500 (^GSPC) fell about 0.4%.
Royal Caribbean, UPS and Ford: Stock trends in premarket trading
Here are some of the stocks topping Yahoo Finance’s trend ticker page in premarket trading on Thursday:
Royal Caribbean (RCL): Shares rose more than 2% premarket. The cruise ship raised its full-year profit forecast on Thursday.
UPS (UPS): UPS shares fell 4% after the company cut its 2023 sales forecast due to weak demand.
Ford (F): Shares rose over 2%. On Wednesday, Ford said it had reached a tentative agreement to bring 16,000 striking workers back to work within days and pay workers 25% more between 2023 and 2028.
Southwest Airlines (LUV): Shares of Southwest fell 3% after the company reported a decline in profits due to rising labor and fuel costs.
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GDP: US economy grows 4.9% thanks to strong consumer spending
The U.S. economy grew at its fastest pace in nearly two years in the last three months as consumers increased spending despite a high interest rate environment.
As Yahoo Finance Josh Schafer reports:
The Bureau of Economic Analysis’s advance estimate of U.S. gross domestic product (GDP) for the third quarter showed the economy grew at an annual rate of 4.9% in the period, faster than consensus forecasts. Economists surveyed by Bloomberg estimated that the U.S. economy grew 4.5% on an annual basis during the period.
The figure was higher than second quarter GDP, which was revised downwards to 2.1%.
The GDP release highlights the resilience of the US consumer despite ongoing concerns about a slowdown. However, many economists view this as the peak of economic growth before the credit tightening triggered by the Federal Reserve’s interest rate hikes and the recent rise in bond yields hurts business performance and consumer spending.
Read more here.
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Stock futures point to a return to the sell-off
Wall Street stocks were on track Thursday to extend the previous day’s sharp losses as investors awaited new earnings releases.
Dow Jones Industrial Average futures (^DJI) lost 0.41%, or 136 points, while S&P 500 futures (^GSPC) lost 0.67%. Contracts on the tech-heavy Nasdaq 100 (^NDX) were 0.95% lower.
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