Dow down 100 points as U.S. stocks break lower ahead of inflation number

Dow down 100 points as U.S. stocks break lower ahead of inflation number
Spread the love

U.S. stocks traded modestly lower on Thursday with the Dow sliding 100 points as investors look ahead to a reading on May inflation due Friday morning.

What’s happening
  • The Dow Jones Industrial Average
    DJIA,
    -0.27%
    was down 100 points or 0.3% to 32,809

  • The S&P 500
    SPX,
    -0.40%
    was down 25 points or 0.6% to 4,090.

  • The Nasdaq Composite
    COMP,
    -0.53%
    was down 80 points at 12,000.

On Wednesday, the Dow Jones Industrial Average
DJIA,
-0.27%
fell 269 points, or 0.81%, to 32911, the S&P 500
SPX,
-0.40%
declined 45 points, or 1.08%, to 4116, and the Nasdaq Composite
COMP,
-0.53%
dropped 89 points, or 0.73%, to 12086.

U.S. stock indexes remained locked in a tight range: the S&P 500 hasn’t traded above 4,177.51 or below 4,073.85 this month.

What’s driving markets

U.S. stocks traded lower after the European Central Bank affirmed that next month it would halt asset purchases and raise interest rates for the first time in more than a decade.

ECB chief Christine Lagarde’s statement was perceived as hawkish, which knocked knocked European stocks down and U.S. equity indexes followed. The European STOXX 600
MEUD,
-1.83%
was off 1% to 435.8 in recent trade.

A team of macro strategists at TD Securities blamed the risk-off tone on the ECB essentially pre-announcing an interest rate hike of between 25 and 50 basis points in September depending on the inflation outlook.

“This generally reads as the ECB finally realising they need to be in ‘catch-up’ mode with rate hikes, at least out the gate, but once rates have reached positive territory, the pace of tightening can slow,” said James Rossiter, head of global macro strategy at TD Securities.

Stocks had wavered between gains and losses earlier as investors awaited U.S. inflation data for May that’s expected to be released Friday morning.

Earlier, Julian Emanuel, a strategist at Evercore ISI, reduced his year-end S&P 500 index price target to 4,300 from 4,800. He said a decisive move lower in retail gasoline prices is needed for stocks to push higher.

“A clear break lower in the price of unleaded gasoline, the most important inflation barometer in the mind of the stressed U.S. consumer, catalyzed by geopolitical easing rather than a sharp economic slowdown, is the standout necessary catalyst that could lead to new highs and the conclusion that the 5/20 low was The Bottom rather than A Bottom which could be tested in the weeks ahead,” he said in a note to clients.

It was a quiet session for U.S. economic data, although data on the number of Americans filing for unemployment insurance showed more newly unemployed workers asking for benefits than at any time during the past five months.

New filings for unemployment benefits jumped by 27,000 last week to five-month high of 229,000, but almost the entire increase appeared to stem from seasonal quirks tied to the Memorial Day holiday.

As for Friday’s CPI number, economists expect inflation to rise 8.2% on an annualized basis according to a FactSet estimate.

Companies in focus
  • Tesla TSLA, the electric vehicle leader, rose in premarket trade after UBS upgraded the stock to buy from neutral while leaving the price target of $1,100 unchanged.

  • NXP Semiconductors
    NXPI,
    +6.47%
    was one of the market’s best performers, rising 6.8%, on reports of a potential takeover by Samsung.

  • Shares of several COVID vaccine makers were down sharply on Thursday, including Moderna,
    MRNA,
    -7.63%
    and Novavax
    NVAX,
    -14.55%.
    The latter was down 14% on worries that the FDA might delay approval of its booster shot.

Other markets

Here’s a rundown of how other markets were trading on Thursday.

  • The U.S. dollar weakened slightly against the Japanese yen
    USDJPY,
    -0.09%,
    trading at 133.5 yen to the dollar.

  • Treasury yields inched higher, with the 10-year
    TMUBMUSD10Y,
    3.049%
    gaining 1.5 basis points to 3.04%, holding above the critical 3% threshold.

  • Crude oil prices
    CL.1,
    -0.63%
    eased on Thursday following Wednesday sharp move higher, as front-month futures for WTI crude — the U.S. benchmark — down 0.2% to $122 per barrel.

Leave a Reply

Your email address will not be published. Required fields are marked *