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U.S. stocks were near session lows in choppy trade on Thursday, as investors digested data that showed a rebound in the U.S. economy in Q3 and took stock of quarterly results from several high profile companies. A slide in Meta Platforms dragged down the Nasdaq. Bond markets extended their rally to a third straight day.
In late afternoon trade, the S&P 500 (SP500) was down 0.43% to 3,814.29 points. The benchmark index earlier rose as much as 0.8% in the morning, but has since then reversed course and been steadily moving lower.
The tech-heavy Nasdaq Composite (COMP.IND) had lost 1.50% to 10,806.31 points, as Meta slumped more than 20% on grim financial numbers. The blue-chip Dow (DJI) was up 0.81% at 32,097.20 points.
Seven of the 11 S&P sectors were trading in the green, with Industrials and Energy the top gainers. Amongst the four sectors that were down, Communication Services was the top loser.
Q3 U.S. GDP numbers came in at a higher than anticipated rise of 2.6% versus a consensus of 2.3%. The data helped calm recession worries, but also showed that the Federal Reserve’s rate hikes were still not having their full effect in terms of cooling the economy.
“Tough to say at this point that the Fed has made much headway in pushing economic growth below trend… A lot of nominal growth still needs to be removed from the economy, which will likely take higher interest rates,” Seeking Alpha contributor Mort Capital Management said.
Quarterly earnings were also in focus in Thursday’s action. Industrial bellwether Caterpillar, aerospace parts maker Honeywell, fast-food giant McDonald’s and drugmaker Merck all gained after their reports. Along with a rebound in shares of Boeing, they helped elevate the Dow.
Among other earnings related news, Comcast and ServiceNow also rose. Megacap technology firms Amazon and Apple are on tap to report after the bell today, along with Intel.
Turning to rates, the 10-year Treasury yield (US10Y) was down 7 basis points to 3.95% and the 2-year yield (US2Y) was down 9 basis points to 4.33%. The dollar index (DXY) was +0.8%.
“Demand for the 10-year note has been sizeable since the peak of 4.34% was reached on Friday,” Caxton’s Michael Brown said. “Two factors seem to be driving this- pricing a slower pace of Fed hikes, and some haven demand as a result of yesterday’s slump in risk appetite. A break below 4% could make things interesting, and would certainly pose further headwinds for the dollar, which touched a 3-week low against a basket of peers on Wednesday.”
Earlier in the day, the European Central Bank raised interest rates by 75 basis points for a second meeting in a row, which came in line with expectations.
Market participants widely expect the Fed to raise rates by 75 basis points at their policy meeting starting next Wednesday. Speculation that the central bank might hint at slowing down the quantum of hikes have helped lift equities since last week.
“We expect the FOMC to keep its options open rather than provide guidance that the pace of rate hikes is slowing down in December,” UBS’ Jonathan Pingle said. “Mathematically, the FOMC seems pretty likely to slow down the pace of hikes at some point. The federal funds rate should not be a monotonically increasing function forever,” he added.
In other economic news on the domestic front, the personal consumption price index came in at +4.2%, down from the previous +7.3% reading.
Initial jobless claims rose to 217K compared to an expected figure of 223K.
September durable goods orders came in at +0.4%, below the forecasted +0.6% level.
