Wall Street on Thursday halted a three-day rally, as a slide in industrial and energy stocks countered a jump in the technology sector.
Traders digested an eventful Wednesday which saw the latest consumer inflation data come in surprisingly soft, helping markets hit a new record high and countering a slightly more hawkish-than-expected Federal Reserve dot plot.
The tech-heavy Nasdaq Composite (COMP:IND) was clinging onto gains of 0.06% at 17,619.82 points in afternoon trade. The gauge was boosted by a rise in chipmaker Broadcom (AVGO) and electric vehicle giant Tesla (TSLA).
The benchmark S&P 500 (SP500) opened higher, but then quickly gave up those gains. It was last down 0.06% to 5,418.00 points, hovering near all-time levels. The blue-chip Dow (DJI) slipped 0.45% to 38,539.16 points.
Of the 11 S&P sectors, eight were in the red, led by Industrials. Technology topped the three gainers.
Broadcom (AVGO) soared more than 12%, after its quarterly results and guidance and an announcement of a stock split cheered investors. Meanwhile, Tesla (TSLA) climbed after top boss Elon Musk hinted that two key shareholder proposals regarding his compensation and the redomestication of the company were going to pass.
Inflation continued to be at the top of investors’ minds. A day after the first flat headline consumer price index (CPI) reading for the year, the U.S. Bureau of Labor Statistics repoted that the producer price index (PPI) for May fell 0.2% M/M. Economists had expected a rise of 0.1%. Meanwhile, core PPI came in unchanged.
The Fed on Wednesday kept its benchmark policy rate steady, as widely expected, but also acknowledged that there had been “modest further progress” towards their 2% inflation target. Countering that slightly bullish signal was the updated Summary of Economic Projections (SEP), which now showed an expectation of only one 25 basis point rate cut in 2024 from a prior forecast for three such cuts.
“The CPI and PPI data mean core PCE likely rose only 0.11% in May, well below the 0.19% average for May-Dec implied by the Fed’s new forecasts. Y/Y core PCE should be just 2.6% in May, down from 4.7% in May last year. No wonder markets don’t believe the new dotplot,” Pantheon Macro’s Ian Shepherdson said on X (formerly Twitter).
Market participants do appear to be slightly skeptical of the dot plot, especially after Fed chief Jerome Powell at the post-decision press conference gave noncommittal remarks when asked if the CPI data had been properly baked into the SEP.
“Powell’s answer as to whether (Wednesday) morning’s CPI was fully factored into the dots was a little ambiguous, so there’s an argument that they aren’t entirely marked to the data. It’s possible Powell was in the two-cut plurality of dots for this year, though hard to say for sure given that there are many participants, some new, who haven’t commented on policy recently,” JPMorgan’s Michael Feroli said.
U.S. Treasurys extended their climb on Thursday, after a $22B 30-year bond auction traded through. The longer-end 30-year yield (US30Y) was down 8 basis points to 4.40%, while the 10-year yield (US10Y) was down 7 basis points to 4.23%. The shorter-end more rate-sensitive 2-year yield (US2Y) was down 8 basis points to 4.68%.
See live data on how Treasury yields are doing across the curve at the Seeking Alpha bond page.
