Stocks Moved Lower on Thursday: Wall Street Reacts to Rising Interest Rates and Earnings Results
The stock market experienced a downtrend on Thursday, continuing the sell-off trend from the previous day.
Wall Street closely monitored the rise in interest rates and analyzed the latest earnings reports to gain valuable insights into the overall health of corporations.
The Market Performance
The major indices reflected the bearish sentiment, with the S&P 500 sliding 0.4%, the Nasdaq Composite losing 0.2%, and the Dow Jones Industrial Average falling 104 points or 0.3%. Additionally, the benchmark 10-year Treasury yield traded around 4.1%, reaching its highest level since November 2022, which further impacted the real estate sector, causing a drop of more than 1%.
Momentum Erosion and Correction
Chris Verrone, Strategas head of technical and macro research, observed that momentum had been gradually eroding over the past few weeks. This erosion was the catalyst for their correction hunch a few weeks ago. He explained that such episodes typically follow a three-step process – a break, a tepid rally, and another break. However, Verrone also pointed out that the longer-term trend remains upward.
Earnings Highlights
The week remained busy with earnings reports, some of which had a significant impact on stock prices. Chipmaker Qualcomm experienced a 10% drop in its stock value after missing third-quarter revenue expectations and issuing disappointing guidance. Similarly, PayPal slumped 10% following its in-line results. On a positive note, Moderna gained 1.5% after an optimistic outlook on its boosted Covid vaccine.
Tech giants Apple and Amazon were yet to release their earnings reports, adding to the market’s anticipation. FactSet data revealed that nearly 79% of S&P 500 constituents had already published their latest quarterly reports, with approximately 82% beating expectations.
Fitch Ratings and the Market Reaction
Wednesday saw a significant sell-off triggered by Fitch Ratings cutting the U.S.’s long-term foreign currency issuer default rating from AAA to AA+. The reason cited was the “expected fiscal deterioration” over the next three years. This downgrade had a substantial impact on the market, with the Nasdaq Composite experiencing its worst day since February, and both the S&P 500 and Dow Jones Industrial Average closing lower.
Bank of England’s Interest Rate Hike
In other international news, the Bank of England raised interest rates by 25 basis points, joining the global trend of central banks taking measures to control inflation.
Economic Data Assessment
Wall Street also closely scrutinized the latest economic data. The weekly jobless claims and second-quarter productivity data both showed an uptick, adding to the market’s complexity and providing further insights into the economic landscape.