AUS
NZ
UK
CA
USA
IND
Headlines
- Major U.S. stock indexes fell significantly, with the Nasdaq dropping 2.3% and the Dow losing 495 points.
- Economic data raised concerns about the Federal Reserve's delay in cutting interest rates.
- Meta shares advanced by 4.3% following robust Q2 earnings.
Major U.S. equity averages experienced a sell-off on Thursday as weak economic data reignited concerns about the Federal Reserve's decision to delay cutting interest rates. Despite the overall market downturn, Meta (NASDAQ:META) saw a rise after posting stronger-than-expected Q2 results.
Stock indexes dropped earlier in the day but recovered slightly from session lows. The Nasdaq Composite (COMP:IND) fell 2.3%, marking its steepest decline since July 24, while the Dow (DJI) decreased by 1.2%, shedding 495 points, with Boeing (BA) leading the decline. The S&P 500 (SP500) fell 1.4%, with six of its 11 sectors in the red, driven by a 3.4% drop in the Information Technology sector (XLK). The CBOE Volatility Index (VIX) surged approximately 14%, reaching its highest level since mid-April.
Economic reports at the start of August painted a bleak picture. Weekly initial jobless claims rose to 249,000, surpassing the 236,000 consensus, and the U.S. PMI Manufacturing Index slipped into contraction territory at 49.6 in July.
These reports followed the Federal Open Market Committee's decision to maintain its key interest rate at 5.25%-5.5%, where it has been for a year. Policymakers stated they are now focusing on maximum employment alongside managing inflation. Fed Chair Jerome Powell indicated that an interest rate cut "could be on the table" as early as September. The likelihood of the Fed initiating its rate-cutting cycle with a substantial 50 basis point reduction increased on Thursday. The July nonfarm payrolls report is due on Friday.
Leo Nelissen from iREIT on Alpha told Seeking Alpha that "after yesterday’s rally, today’s sell-off signals fear as the market perceives lower chances of a 'soft landing'." He noted that the ISM Manufacturing survey revealed a "gloomy outlook" with declining new orders and rising prices, while increasing unemployment claims suggested weakening economic growth. Nelissen added, "unless economic growth improves, even rate cuts won't be bullish for this market."
Jose Torres, senior economist at Interactive Brokers, commented that market players are anxious about the central bank's slow pace in reducing rates, despite Powell's hint at a September rate cut. He noted concerns about the U.S. lagging behind other central banks in accommodating monetary policy, with the Bank of England recently reducing borrowing costs.
In response to the economic data, investors turned to U.S. government debt, pulling the 10-year Treasury yield (US10Y) down 5 basis points to 3.99%, falling below 4% for the first time since February. The 2-year yield (US2Y) fell 9 basis points to 4.17%.
In contrast to the general market trend, Meta (META) shares rose by 4.3% after the company surpassed Q2 expectations and projected Q3 sales between $38.5 billion and $41 billion, compared to a $39.2 billion consensus.
Traders also anticipated earnings results from tech giants Apple (NASDAQ:AAPL) and Amazon (NASDAQ:AMZN), due after market close on Thursday.
On the broader economic front, U.S. employers announced 25,885 job cuts in July, a 47% drop from the 48,786 cuts in June. Nonfarm labor productivity increased by 2.3% quarter-over-quarter in Q2, exceeding the expected 1.7% rise.
Among individual stocks, Moderna (NASDAQ:MRNA) saw shares drop by 20% after the biotech company reduced its FY2024 product sales outlook due to lower COVID vaccine sales. Conversely, Carvana (CVNA) surged nearly 11% after the online auto seller reported a quarterly profit of $0.14 per share.
