Tech stocks led a broad equity retreat Thursday, as Wall Street fretted about the hawkish message sent out by the Federal Reserve alongside its decision to hold interest rates steady.
The S&P 500 (^GSPC) sank 1.1%, after losing almost 1% on Wednesday, and the Dow Jones Industrial Average (^DJI) dropped 0.6%. The tech-heavy Nasdaq Composite (^IXIC) fell almost 1.3% to continue to lead the declines.
After combing through the central bank’s forecast, investors believe its policymakers see interest rates staying “higher for longer.” The debate is over just how long that “longer” will be, given the central bank signaled another hike at one of its final two meetings this year. Goldman Sachs has pushed back its forecast for a Fed rate cut to the fourth quarter of 2024.
Read more: What the Fed rate-hike pause means for bank accounts, CDs, loans, and credit cards
The prospect of a prolonged period of elevated rates has spooked some investors, as that would put pressure on stocks and bonds. The yield on the benchmark 10-year Treasury rose on Thursday, at one point touching its highest level in over 15 years.
However, Fed Chair Jerome Powell stressed policy will be dependent on economic data in his press conference. Official figures out Thursday showed jobless claims last week fell to their lowest level since January, the latest sign of strength in the US labor market.
The Bank of England decided to hold interest rates steady on Thursday, pausing tightening after hiking 14 times in a row after an unexpected slowdown in inflation. Elsewhere in European central banks, there were a couple of surprises: The Swiss National Bank kept its rates on hold while Norway’s central bank signaled it could follow September’s hike with another in December.
In individual stocks, shares of FedEx popped after a big quarterly profit beat.
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Afternoon trending stocks
Here are some of the stocks on Yahoo Finance’s trending tickers page in afternoon trading on Thursday:
Eli Lilly (LLY): The drug maker’s stock was down 4% after the company said earlier this week that it was suing 10 medical spas, wellness centers and compounding pharmacies for selling unauthorized versions of its diabetes drug Mounjaro, which is expected to be approved for weight loss later this year.
FedEx (FDX): Shares in FedEx were up nearly 5%, a day after it posted a profit beat thanks in part to its taking customers from rivals.
Splunk (SPLK): Splunk’s shares surged by more than 20% in afternoon trading after the AI and data-focused cloud computing company agreed to a $28 billion takeover by Cisco (CSCO), which fell by 4%.
Klaviyo (KVYO): Shares in Klaviyo fell 0.8%, a day after the marketing automation firm made its stock market debut.
NVIDIA (NVDA): The chip giant’s shares were down 2%, as several rate-sensitive stocks took a hit after the Fed’s hawkish pause.
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Stocks fall in afternoon trading
Wall Street lost more ground Thursday afternoon as investors grappled with the Fed’s hawkish signals of extending elevated rates further into the future.
The S&P 500 (^GSPC) lost 1.1%, while the Dow Jones Industrial Average (^DJI) decreased about 0.6% or 200 points. The tech-heavy Nasdaq Composite (^IXIC) shed roughly 1.3%.
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Jobless claims unexpectedly fall in another sign of resilience
The number of Americans who applied for unemployment benefits last week dropped by 20,000, registering the lowest figure since January, in another sign of a resilient labor market even as the Federal Reserve pushes ahead with its tightening campaign.
New jobless claims came in at 201,000, according to data the Labor Department released on Thursday, beating expectations of 225,000. It was another stronger-than-expected reading in the face of elevated interest rates.
Central bankers are closely watching for signs of weakness in the labor market as they attempt to pull down historic levels of inflation. Unemployment claims tend to rise as the economy weakens, which can foreshadow a recession. Jobs figures have proven robust in recent months, however, fueling hopes that the Fed’s tightening won’t unleash a wave of layoffs or otherwise trigger a widespread economic downturn. On the contrary, Fed Chair Jerome Powell said Wednesday during a much-anticipated policy press conference that he’s looking out for more strong economic activity, which could prompt the Fed “to do more with rates.”
The Fed has warned about the stronger-than-expected US economy, and central bankers are now projecting the economy to grow 2.1% this year up from June’s 1.0% projection.
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Fox, News Corp stocks rise after Chair Rupert Murdoch steps down
Investors at Fox (FOXA) and News Corp. (NWS, NWSA) seemed pleased after the companies announced Thursday that Chair Rupert Murdoch stepped down from his leadership roles, punctuating a career that forged a global media empire over the span of seven decades and shaped the modern era of news media. Murdoch’s eldest son Lachlan, who had served as co-chair of News Corp, will become chair of that company and continue as executive chair and CEO of Fox.
Lachlan’s ascension has ended questions of his father’s succession and solidifies Lachlan’s role as the empire’s new leader. Fox shares rose by more than 2% and News Corp gained 0.8% during morning trading on Thursday.
“For my entire professional life, I have been engaged daily with news and ideas, and that will not change. But the time is right for me to take on different roles,” Murdoch wrote in a memo to staff. Murdoch, 92, will be appointed chair emeritus of both companies.
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Stocks trending in morning trading
Here are some of the stocks leading Yahoo Finance’s trending tickers page in morning trading on Thursday:
Splunk (SPLK): Splunk’s shares surged by more than 20% in morning trading after the AI and data-focused cloud computing company agreed to a $28 billion takeover by Cisco (CSCO), which fell by 3%. The all-cash offer to buy Splunk at $157 per share meant the deal priced in a 30% premium. “For Cisco this is a shot across the bow at Palo Alto, Checkpoint, Crowdstrike, Microsoft, Zscaler and others that the tech stalwart is not sitting idle in this market and now is making an aggressive play to gain market share in the coming years,” said Wedbush Analyst Dan Ives in a note on Thursday.
FOX (FOXA) and News Corp. (NWS, NWSA): Investors at Fox and News Corp appeared to take heart after the companies announced Thursday that Chair Rupert Murdoch stepped down from his leadership roles, ending a career that spanned more than seven decades and forged a global media empire. Murdoch’s son Lachlan will become the sole chair of both boards. The transition put to rest questions of Murdoch’s succession and solidifies Lachlan’s role as the empire’s new leader. Fox shares rose by nearly 3% and News Corp gained 0.8%.
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Stocks open lower after the Fed signals longer tightening cycle
The sour sentiment on Wall Street continued through the opening bell Thursday as investors digested the Fed’s hawkish message of keeping rates higher for longer.
The S&P 500 (^GSPC) lost 0.6%, while the Dow Jones Industrial Average (^DJI) decreased 0.3% or about 100 points. The tech-heavy Nasdaq Composite (^IXIC) lost 0.9%
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Broadcom, Klaviyo, Nvidia: Stocks trending in premarket trading
Here are some of the stocks leading Yahoo Finance’s trending tickers page in premarket trading on Thursday:
Broadcom (AVGO): Broadcom’s shares fell by 6% in premarket trading after it was reported that Google executives had discussed dropping the company as a supplier of artificial intelligence chips by as early as 2027.
Klaviyo (KVYO): Shares in Klaviyo fell 3%, a day after the marketing automation firm made its stock market debut.
Nvidia (NVDA): The chip giant’s shares were down 2% as several rate-sensitive stocks took a hit after the Fed’s hawkish pause.
FedEx (FDX): Shares in FedEx were up 5%, a day after it posted a profit beat thanks in part to taking customers from rivals.
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KStocks on track to fall further as Fed forecast sinks in
Wall Street stocks looked set to extend losses on Thursday as investors debated how long it could be before Fed policymakers cut interest rates from their elevated levels.
Futures tied to the Dow Jones Industrial Average (^DJI) were down 0.50%, or 175 points, while S&P 500 (^GSPC) futures lost 0.70%. Nasdaq 100 futures dropped 0.92%
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