The U.S. stock market experienced a sharp decline on Thursday following weak economic data that raised concerns about the Federal Reserve’s ability to cut interest rates in a timely manner. The S&P 500 dropped 1.4% after a report revealed that U.S. manufacturing activity is still contracting and accelerating. This contraction has been exacerbated by high interest rates, which have negatively impacted various sectors of the economy. The Dow Jones Industrial Average also fell by 1.2%, while the Nasdaq composite saw a 2.3% decline.
The bond market also experienced significant movement, with the yield on the 10-year Treasury dropping below 4%, back to levels last seen in February. This decline was driven by the soft manufacturing data and reports showing an increase in the number of U.S. workers applying for jobless benefits. While this data may alleviate upward pressure on inflation, it also raises concerns that the Fed may have kept rates too high for too long, hindering economic growth.
The weak economic numbers have heightened anticipation for the upcoming employment report, which is expected to show a slight slowdown in U.S. hiring. Wall Street is hoping for a balanced reading that does not exacerbate concerns about inflation or recession. However, the effects of Hurricane Beryl could skew the data, leading to a potentially misleading headline number.
The tech sector played a significant role in Thursday’s market movements, with Meta Platforms (formerly Facebook) standing out as a bright spot. The company reported better-than-expected profit and revenue for the latest quarter, driving its stock price up by 4.8%. Other tech companies, such as ARM Holdings, delivered strong financial results but saw their stock prices decline due to concerns about future growth prospects.
The broader market was also impacted by uncertainty surrounding the earnings reports of tech giants like Amazon and Apple, both of which are members of the „Magnificent Seven“ group of influential stocks. These companies have faced scrutiny over their high valuations and profit expectations, leading to investor caution.
Overall, the S&P 500 fell by 75.62 points to 5,446.68, while the Dow dropped 494.82 points to 40,347.97, and the Nasdaq tumbled 405.25 points to 17,194.15. Traders are anticipating a rate cut by the Federal Reserve in September, with questions remaining about the extent of future rate cuts. The global market also saw fluctuations, with the Bank of England cutting interest rates for the first time since the onset of the COVID-19 pandemic, impacting stock indexes in Europe and Asia.
In conclusion, the U.S. stock market’s decline on Thursday reflects concerns about the economy’s growth prospects and the Federal Reserve’s ability to navigate current challenges. The upcoming employment report and future rate decisions will be closely watched by investors as they assess the market’s trajectory in the coming months.