Stocks on Wall Street have their worst day in three weeks
Wall Street slumped Thursday, despite a blowout profit report from Nvidia, after some mixed reports on the U.S. economy.
The Standard & Poor’s 500 index dropped 1.3%, its worst loss in three weeks. That nearly wiped out its gain for the week, which had been a bright spot in what’s been a rough August.
The Dow Jones industrial average slid 373 points, or 1.1%, and the Nasdaq composite tumbled 1.9%.
Stocks sank as Treasury yields stabilized after their tumble a day earlier. High yields in the bond market have been upping the pressure because they make investors less willing to pay high prices for stocks and other risky investments. They may be set to go even higher, depending on what the head of the Federal Reserve says in a speech scheduled for Friday.
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The yield on the 10-year Treasury rose to 4.23% from 4.20% late Wednesday. It fell there from 4.33% a day before, close to its highest level since 2007.
Yields found some traction after a couple of mixed reports on the U.S. economy.
One report showed that fewer U.S. workers applied for unemployment benefits last week. That’s the latest sign the job market remains remarkably resilient despite high interest rates.
Another report said orders for long-lasting manufactured goods slumped more last month than economists expected. That could be a signal that conditions are worsening for the struggling manufacturing industry, but — ignoring airplanes and other transportation equipment — orders actually rose more than expected for the month.
For now, weaker-than-expected reports on the economy may counterintuitively be more welcome in financial markets. The economy has managed to avoid a long-predicted recession, but the fear is that the economy is so solid, it will keep upward pressure on inflation.
Americans increased their purchases at retailers last month in a sign that solid consumer spending is still powering a resilient U.S. economy.
The Federal Reserve already has raised its main interest rate to the highest level since 2001 in hopes of grinding down high inflation. High rates work to do that by slowing the entire economy and hurting prices for investments.
Hope had built that the Fed’s latest rate hike in July may prove to be the last of this cycle, after inflation cooled considerably since peaking above 9% last summer. Traders also have made bets for the Fed to begin cutting rates early next year.
But a series of stronger-than-expected reports on the economy has diminished those hopes. That’s why Fed Chair Jerome H. Powell’s speech Friday morning is so highly anticipated. He’ll be speaking at an event in Jackson Hole, Wyo., that has been the site of major policy announcements in the past by the Fed.
The two-year Treasury yield, which moves closely with expectations for the Fed, rose to 5.01%. A day before, it had dropped to 4.98% from 5.05% after a report suggested U.S. business activity is cooling in August.
That weaker-than-expected report led John Vail, chief global strategist at Nikko Asset Management, to think Powell may not sound as aggressive about keeping rates high.
But he still said Powell “will likely express concerns about inflation not falling fast enough and that the market should not expect any cuts through at least the first part of 2024.”
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Stocks’ weakness Thursday came despite a much stronger-than-expected profit report from Nvidia, one of Wall Street’s most influential stocks. That raised hopes that this year’s frenzy on Wall Street around artificial intelligence technology isn’t just hype.
Nvidia first stunned the market three months ago when it said the quick adoption of AI would send its revenue soaring in the three months through July. Its sales came in even better than forecast, at $12.51 billion, and the company gave a forecast for the current quarter that again blew past Wall Street’s expectations.
Nvidia’s stock shot up more than 6% in the morning and seemed to be headed for a record close. But that rise diminished through the day, and it finished with a gain of just 0.1%. It was nevertheless one of the strongest forces pushing up on the S&P 500. More than 80% of stocks in that index fell.
On the losing end of Wall Street, Dollar Tree shares slid 12.9% despite stronger-than-expected profit and revenue for the latest quarter. The company said customers are shifting their purchases toward products that are less profitable for it. Like other retailers, it also cited inventory “shrink,” which means theft and other losses of products.
Petco stock tumbled 20.6% after the pet supplies seller said its customers are also feeling pressure. It cut its forecast for full-year earnings, though its results for the latest quarter matched or beat analysts’ expectations.
All told, the S&P 500 fell 59.70 points to 4,376.31. The Dow dropped 373.56 points to 34,099.42, and the Nasdaq sank 257.06 points to 13,463.97.
In stock markets abroad, indexes mostly rose in Asia and were mixed in Europe.
AP writers Yuri Kageyama and Matt Ott contributed to this report.
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