U.S. stocks weakened on Thursday ahead of a key speech by Federal Reserve Chair Jerome Powell. The S&P 500 fell 0.9% while the Dow Jones Industrial Average dropped 0.4% and the Nasdaq composite sank 1.7%. The bond market put pressure on stocks as Treasury yields rose following mixed data on the U.S. economy, which has been slowing due to high interest rates meant to control inflation. One report showed a slight increase in workers applying for unemployment benefits, signaling a cooling job market. Another report indicated a split in U.S. business activity, with growth in services businesses but contraction in the manufacturing sector.
The U.S. economy is still growing but shows signs of fragility, with growth becoming more reliant on the service sector as manufacturing declines. The Federal Reserve has raised interest rates to control inflation, but with inflation slowing, the expectation is for the Fed to cut rates at its next meeting in September. Powell’s speech at an economic symposium in Jackson Hole, Wyoming on Friday is highly anticipated as investors hope for clues on the timing and extent of rate cuts to support the economy.
Investors are cautious about potential over-expectations for rate cuts, which could lead to an overdone drop in Treasury yields. Lower yields have benefited mortgage rates and helped stabilize home sales. While U.S. companies are reporting better-than-expected profits, some stocks experienced declines, including Nvidia and Snowflake. Nvidia’s stock has been volatile due to concerns about its valuation, while Snowflake fell despite surpassing profit and revenue expectations. Advance Auto Parts tumbled after missing Wall Street’s profit expectations and reducing its full-year forecast.
The S&P 500 fell over 50 points, while the Dow and Nasdaq also experienced losses. In the bond market, the 10-year Treasury yield rose. Global stock markets made mostly modest moves with Asian and European indexes showing mixed results. South Korea’s Kospi rose after keeping rates unchanged, while Hong Kong’s Hang Seng jumped significantly. Overall, the market remains cautious in anticipation of Powell’s speech and potential future rate cuts by the Federal Reserve.
Overall, the market is closely watching for any hints on future Federal Reserve actions to support the economy amidst mixed data on the U.S. economy. Powell’s speech at Jackson Hole is expected to provide clarity on the timing and extent of potential rate cuts. However, investors remain cautious about overestimating rate cuts, as this could lead to excessive drops in Treasury yields. Market volatility continues as some stocks rise on positive earnings reports, while others face declines despite beating expectations. The global market remains uncertain as central banks navigate economic conditions and investors react to changing data.
