Stocks slumped on Thursday as another hotter-than-expected inflation report added fuel to concerns that the Federal Reserve will need to maintain its hawkish stance longer than previous expected. At the same time, the latest read on the job market pointed to continued strength on the labor front.
The Nasdaq Composite (COMP.IND) closed -1.8%, the S&P 500 (SP500) finished -1.4% and Dow (DJI) ended -1.3%.
Looking at the closing numbers, Nasdaq concluded trading at 11,855.83, a slide of 214.76 points. The S&P 500 fell 57.19 points to end at 4,090.41, while the Dow Jones dropped 431.20 points to finish at 33,696.85.
All 11 S&P sectors finished lower, with eight posting a loss of more than 1%. This was led by a 2.2% drop in Consumer Discretionary, with notable slides also coming from Info Tech and Communication Services.
“Another down day as markets start to realize that there isn’t an easy way out of this mess,” analyst Leo Nelissen of BN Capital told Seeking Alpha. “Producer prices came in hotter than expected while housing indicators and the Philadelphia manufacturing index pointed to more demand weakness. As I expected, the market is now pricing in more hikes.”
Nelissen added: “[The market] now sees three more 25 basis points hikes to a terminal rate of 5.50%. The mix with slower economic growth makes stagflation more likely. Hence, stocks once again failed to gain momentum in the upper bound of my expected trading range between the low-3,000 to mid-4,000 trading range.”
Following choppy sessions over the previous couple days, Wall Street opened lower after a report on wholesale inflation came in above expectations. This followed a similar result for consumer prices earlier this week. Shares attempted to recover in the middle of the day but swung back to the downside in late trading.
Government data showed that the producer price index rose 0.7% M/M in January. This topped expectations and marked the largest increase since June last year.
Elsewhere, initial jobless claims dropped to 194K. The figure, which measures the number of people filing for first-time employment claims, came in below the anticipated figure of 200K. This result continued to point to a tight labor market, further evidence that higher interest rates have yet to significantly dent the economy.
Turning to the fixed income markets, yields pushed higher. The 10-year Treasury yield (US10Y) advanced 6 basis points to 3.87%, while the 2-year yield (US2Y) rose 2 basis point to 4.65%.
Among active stocks, Shopify (SHOP) dropped after the company’s quarterly report included Q1 guidance that suggested slowing revenue growth rates compared to Q4.