U.S. Stocks Move To The Downside Following Powell Remarks

(RTTNews) - After showing a lack of direction for much of the session, stocks came under pressure in the latter part of the trading day on Thursday. The major averages slid more firmly into negative territory after spending most of the day bouncing back and forth across the unchanged line.

The major averages ended the day just off their lows of the session. The Dow slid 207.33 points or 0.5 percent to 43,750.86, the Nasdaq fell 123.07 points or 0.6 percent to 19,107.65 and the S&P 500 declined 36.21 points or 0.6 percent to 5,949.17.

The weakness that emerged on Wall Street late in the session came after Federal Reserve Chair Jerome Powell said the central bank does not "need to be in a hurry to lower rates" due to the strength of the economy.

"The economy is not sending any signals that we need to be in a hurry to lower rates," Powell said during an event in Dallas, Texas. "The strength we are currently seeing in the economy gives us the ability to approach our decisions carefully."

Powell's comments on the outlook for rates came as he described the U.S. economy's performance as "remarkably good," noting the labor market remains in solid condition but is no longer a source of significant inflationary pressures.

He also said the Fed is attentive to risks to both its employment and inflation goals, noting cutting rates too quickly could hinder progress on inflation but cutting rates too slowly could unduly weaken economic activity and employment.

"We are moving policy over time to a more neutral setting. But the path for getting there is not preset," Powell said. "Ultimately, the path of the policy rate will depend on how the incoming data and the economic outlook evolve."

Powell's remarks came as the latest batch of U.S. economy data released earlier in the day generated some uncertainty about the outlook for interest rates.

The Labor Department released a report this morning showing first-time claims for U.S. unemployment benefits unexpectedly edged lower in the week ended November 9th.

The report said initial jobless claims slipped to 217,000, a decrease of 4,000 from the previous week's unrevised level of 221,000. Economists had expected jobless claims to inch up to 223,000.

The unexpected decline pulled jobless claims down to their lowest level since hitting 216,000 in the week ended May 18th.

After yesterday's consumer price inflation data matched expectations, the Labor Department also released a separate report showing producer prices in the U.S. also increased in line with economist estimates in the month of October.

The Labor Department said its producer price index for final demand rose by 0.2 percent in October following a revised 0.1 percent uptick in September.

Meanwhile, the report said the annual rate of growth by producer prices accelerated to 2.4 percent in October from an upwardly revised 1.9 percent in September.

The annual rate of producer price growth was expected to accelerate to 2.3 percent from the 1.8 percent originally reported for the previous month.

The slightly faster than expected annual price growth combined with the jobless claims data showing continued strength in the labor market has added to recent uncertainty about the outlook for interest rates.

While the Fed is still widely expected to lower interest rates by a quarter point next month, there is some concern sticky inflation will lead the central bank to slow the pace of its rate cuts in early 2025.

Sector News

Biotechnology stocks moved sharply lower over the course of the session, dragging the NYSE Arca Biotechnology Index down by 2.8 percent.

Significant weakness also emerged among healthcare and pharmaceutical stocks, with the Dow Jones U.S. Health Care Index and the NYSE Arca Pharmaceutical Index falling by 1.6 percent and 1.5 percent, respectively.

Networking, steel and commercial real estate stocks also showed notable moves to the downside, while considerable strength remained visible among airline stocks.

Reflecting the strength in the airline sector, the NYSE Arca Airline Index jumped by 1.8 percent after plummeting by 7.3 percent on Wednesday.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region moved mostly lower during trading on Thursday. Japan's Nikkei 225 Index fell by 0.5 percent, while China's Shanghai Composite Index tumbled by 1.7 percent and Hong Kong's Hang Seng Index dove by 2.0 percent.

Meanwhile, the major European markets moved to the upside on the day. While the U.K.'s FTSE 100 Index climbed by 0.5 percent, the French CAC 40 Index and the German DAX Index jumped by 1.3 percent and 1.4 percent, respectively.

In the bond market, treasuries regained ground after turning lower over the course of the previous session. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, fell 3.3 basis points to 4.418 percent.

Looking Ahead

Trading on Friday may be impacted by reaction to the latest U.S. economic data, including reports on retail sales and industrial production.