Stock market news today: Stocks slide after weak economic data as 10-year yield falls below 4%
08/01/2024 23:24
Stocks tumble despite strong Meta results and indications from the Fed of a September rate cut.
US stocks fell on Thursday as weak economic data trickled in, despite better than expected Meta (META) results and hints from the Federal Reserve of a September rate cut.
The S&P 500 (^GSPC) fell almost 1%, while the tech-heavy Nasdaq Composite (^IXIC) erased earlier gains to drop more than 1% after closing Wednesday with hefty gains. The Dow Jones Industrial Average (^DJI) dropped almost 500 points, or 1.3%.
The 10-year Treasury (^TNX) yield moved below the 4% level for the first time since February, hovering near 3.98%.
The latest ISM data out on Thursday showed the US manufacturing sector sank further into contraction territory during July. Other releases showed jobless claims rose to an 11-month high last week and construction spending unexpectedly declined in June.
The readings reflected a cooling in the US economy that revived concerns about the risk that interest rates at historic highs are driving toward a recession.
Stocks initially moved higher after Fed chair Jerome Powell bolstered the market's confidence in a September interest-rate cut, saying it "could be on the table." Traders mostly expect a 25-basis-point reduction, but bumped up bets on a 50-basis-point move after policymakers held rates steady.
Read more: 32 charts that tell the story of markets and the economy right now
The market is now counting down to Friday's release of the July jobs report, watched closely for further evidence of a slowdown that could shape Fed policy.
Meanwhile, investors are watching for quarterly results, especially from Big Tech names, after Meta's strong report late Wednesday. Shares in the Facebook owner pared an earlier climb of 8% as the market appraised its earnings beat and signs that solid digital ad revenue will give its AI investments time to pay off.
Earnings from Apple (AAPL) and Amazon (AMZN) due after the bell could test the Meta-driven bullishness for techs. They will also test the chances the AI trade can deliver on its promise, which took a hit from earlier disappointing "Magnificent Seven" earnings.
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Mortgage rates fall to lowest level since early February after Fed hints at potential rate cut
Mortgage rates dropped to their lowest level since early February after the Federal Reserve set the stage for a September interest rate cut.
The average rate on the 30-year fixed-rate mortgage fell to 6.73% from 6.78% a week prior, Freddie Mac reported on Thursday. A year ago, the average rate on a 30-year fixed-rate loan was 6.9%.
Separately, the average rate for the 15-year fixed mortgage was 5.99%, down from 6.07% a week prior. The rate on a 15-year loan was 6.25% a year ago.
The data's release came a day after the Fed held interest rates steady at its July policy meeting but hinted that it's closer to cutting rates as it cited "some further" progress on inflation. Fed Chair Jerome Powell told reporters a September cut "could be on the table."
The decline is a welcome decline for prospective homebuyers grappling with affordability. Home prices hit another record in May.
“Expectations of a Fed rate cut coupled with signs of cooling inflation bode well for the market, but apprehension in consumer confidence may prevent an immediate uptick as affordability challenges remain top of mind. Despite this, a recent moderation in home price growth and increases in housing inventory are a welcoming sign for potential homebuyers," Sam Khater, Freddie Mac’s chief economist, said in a release.
Nasdaq, S&P 500 tumble as tech stocks slide
The Nasdaq and S&P 500 tumbled on Thursday as technology and energy stocks led the declines.
The S&P 500 Technology Sector ETF (XLK) fell more than 2%. Shares of Nvidia (NVDA) dropped more than 3% along with other chip stocks.
The Energy Sector (XLE) also dropped more than 2%. Interest rate sensitive stocks such as Real Estate (XLRE) and Utilities (XLU) rose during the session.
The S&P 500 (^GSPC) fell about 1%, while the tech-heavy Nasdaq Composite (^IXIC) also dropped more than 1.4%. The Dow Jones Industrial Average (^DJI) slid roughly 500 points.
The rollover in major averages occurred mid-morning, erasing early session gains after the 10-year Treasury (^TNX) yield moved below the 4% level to hover near 3.98% for the first time since February.
The move in bonds came a day after Fed Chair Jerome Powell hinted a September rate cut. Weak ISM manufacturing data and a spike in jobless claims released on Thursday pointed to signs of a cooling economy.
Semiconductor stocks drop as Nasdaq sinks 1%
Semiconductor stocks slipped on Thursday as the major averages rolled over, erasing early morning gains.
AI chip giant Nvidia (NVDA) fell more than 2% after gaining nearly 13% in the prior session. Broadcom (AVGO) and ASML (ASML) also dropped more than 4%.
Chips were on fire during Wednesdays session after AMD (AMD) posted better than expected results and Microsoft (MSFT), a buyer of AI chips, said it increased capital expenditures on its data center infrastructure.
Chips stocks fall, giving back some of the prior session's gains. Stocks drop as weak economic data points to cooling economy
Stocks erased early morning gains, sinking into red territory as the 10-year Treasury (^TNX) yield fell below the 4% level for the first time since February.
The S&P 500 (^GSPC) dropped 0.7%, while the tech-heavy Nasdaq Composite (^IXIC) fell roughly 0.9%. The Dow Jones Industrial Average (^DJI) sank 0.9%.
As Yahoo Finance's Josh Schafer reported, the US manufacturing sector sank further into contraction territory in July. The ISM's manufacturing PMI registered a reading of 46.8 in July, down from June's reading of 48.5 and lower than the 48.5 economists expected, according to Bloomberg data.
Meanwhile, weekly jobless claims once again rose more than expected last week, in the latest sign of a cooling labor market.
The move lower in stocks comes after a hefty rally on Wednesday following Fed Chair Jerome Powell's comments at the conclusion of the central bank's two-day policy meeting. Powell laid the groundwork for the likelihood of an interest rate cut in September.
10 Year Treasury yield moves below 4% for first time since February
On Thursday, the 10-year Treasury (^TNX) yield moved below the 4% level to hover near 3.98% for the first time since February.
The move comes a day after Fed chair Jerome Powell said a September rate cut was "on the table".
US manufacturing enters deeper contraction
The US manufacturing sector sank further into contraction territory during July.
The ISM's manufacturing PMI registered a reading of 46.8 in July, down from June reading of 48.5 and lower than the 48.5 economists expected, according to Bloomberg data. The reading was the lowest since November 2023.
A print above 50 for this index indicate an expansion in activity, while one below 50 indicates contraction.
“Demand remains subdued, as companies show an unwillingness to invest in capital and inventory due to current federal monetary policy and other conditions," Chair of the Institute for Supply Management Timothy Fiore said in a release.
Stocks open higher after Fed decision, Meta jumps 8%
Stocks opened higher on Thursday to build on the prior session's rally after the Federal Reserve laid the groundwork for a September rate cut and Facebook parent Meta (META) reported better than expected results.
The S&P 500 (^GSPC) climbed 0.4%, while the tech-heavy Nasdaq Composite (^IXIC) gained almost 0.5%. The Dow Jones Industrial Average (^DJI) edged up 0.4%.
Stocks rose after Fed chair Jerome Powell said on Wednesday that a September interest-rate cut "could be on the table."
Meta shares rose about 8% after a strong quarterly report from the social media giant. Like other Big Tech firms, Meta said it expects "significant" capital-expenditure growth in 2025 as it builds out its AI-focused infrastructure.
Jobless claims rise more than expected
Weekly jobless claims once again rose more than expected last week, in the latest sign of a cooling labor market.
New data from the Department of Labor showed 249,000 initial jobless claims were filed in the week ending July 27, up from 235,000 the week prior and above the 235,000 economists had expected. This marked the highest level of weekly filings since August 2023.
Meanwhile, the number of continuing applications for unemployment benefits once again hit its highest level since November 2021, with 1.877 million claims filed in the week ending July 20, up from 1.84 million the week prior.
"The claims data of the past few weeks have been signaling incremental labor market weakness, albeit from a position of strength," Jefferies US economist Thomas Simons wrote in a note on Thursday. "This is another step in the process of the labor market coming into better balance, but we must remain vigilant in watching for signs of slack. We are particularly concerned about a negative impulse in the labor market data, but things can deteriorate quickly once they start."
