The S&P 500 fell 1.5% on Thursday, fading an early 1.2% gain, as technical factors, rising interest rates, and hawkish-sounding Fed commentary overshadowed a batch of pleasing earnings news.
The Nasdaq Composite (-2.1%), Dow Jones Industrial Average (-1.1%), and Russell 2000 (-2.3%) also coughed up early gains and closed sharply lower.
All 11 S&P 500 sectors closed lower in a steady decline with energy (-3.1%) and communication services (-2.4%) taking a brunt of the damage. The consumer staples sector (-0.1%) outperformed on a relative basis with a 0.1% decline.
Tesla ( TSLA 1008.78, +31.58, +3.2%) was the main driver in early action, with shares rallying as much as 12% after the company topped earnings estimates and reaffirmed its multi-year growth expectations. Like the broader market, though, TSLA shares cooled off.
Investors seemed to first lose confidence as the S&P 500 couldn’t stay above its 200-day moving average (4497) early in the day. The benchmark index ultimately fell below its 50-day moving average (4413) on a closing basis.
Risk sentiment was further pressured as the 10-yr yield flirted with 2.96%, and Fed Chair Powell said he wasn’t ready to declare peak inflation, adding that the Fed could move to a tight policy after reaching a neutral rate, if necessary. On a related note, Chicago Fed President Evans (FOMC voter in 2023) plans to retire in early 2023.
The 10-yr yield did calm down a bit, settling eight basis points higher at 2.92%, while the 2-yr yield rose 12 basis points to 2.69%. The U.S. Dollar Index increased 0.2% to 100.60. WTI crude futures rose 1.6%, or $1.62, to $104.02/barrel.
Nevertheless, the upwards trend in rates kept a lid on the growth stocks. The streaming space, meanwhile, couldn’t catch a break with an announcement from Warner Bros. Discovery ( WBD 21.45, -1.56, -6.8%) that it will shut down CNN+ on April 30.
In other earnings news, AT&T ( T 20.21, +0.78, +4.0%), Dow Inc. ( DOW 69.51, +1.97, +2.9%), Nucor ( NUE 175.59, +6.34, +3.8%), American Airlines ( AAL 20.22, +0.74, +3.8%), United Airlines ( UAL 50.85, +4.33, +9.3%), and Alaska Air ( ALK 58.78, +0.09, +0.2%) each closed higher following their earnings reports.
Reviewing Thursday’s economic data:
- Initial jobless claims for the week ending April 16 decreased by 2,000 to 184,000 (Briefing.com consensus 195,000). Continuing jobless claims for the week ending April 9 decreased by 58,000 to 1.417 million, which is the lowest level since February 21, 1970.
- The key takeaway from the report is that it covered the week in which the survey for the April employment report was conducted. The decidedly low level of initial claims should feed expectations for strong nonfarm payrolls growth in April.
- The Philadelphia Fed Index for April decreased to 17.6 (Briefing.com consensus 21.0) from 27.4 in March.
- The Conference Board’s Leading Economic Index (LEI) increased 0.3% m/m in March (Briefing.com consensus 0.3%) following a revised 0.6% increase (from 0.3%) in February.
Looking ahead, investors will receive the preliminary IHS Markit Manufacturing and Services PMIs for April on Friday.
- Dow Jones Industrial Average -4.3% YTD
- S&P 500 -7.8% YTD
- Russell 2000 -11.3% YTD
- Nasdaq Composite -15.8% YTD
Overseas:
- Europe: DAX +1.0%, FTSE -0.0%, CAC +1.4%
- Asia: Nikkei +1.2%, Hang Seng -1.3%, Shanghai -2.3%
Commodities:
- Crude Oil +1.62 @ 104.02
- Nat Gas -0.01 @ 6.94
- Gold -9.40 @ 1945.60
- Silver -0.68 @ 24.57
- Copper +0.02 @ 4.67