U.S. stock averages slid Thursday, with August trade starting off with worries about U.S. economic growth surpassing inflation concerns, but Meta (META) shares held to higher ground following stronger-than-expected quarterly results.
The Nasdaq Composite (COMP:IND) dropped -3%, on course for its worst decline since last week’s daily rout that was triggered by worries about mega-cap tech earnings. The Dow (DJI) fell -1.8%, losing more than 700 points, led by Boeing (BA). The S&P 500 (SP500) lost -2%, with six of its 11 sectors down, paced by the Information Technology sector.
Investors weighed fresh economic updates, including an increase in weekly initial jobless claims by 14K to 249K, more than the 236K consensus. The U.S. PMI Manufacturing Index fell into contraction territory, to 49.6 in July.
The Federal Open Monetary Committee’s July statement Wednesday showed policymakers have shifted to a more balanced view to monitor the employment portion of its dual mandate that includes managing inflation. Fed Chair Jerome Powell said an interest rate cut “could be on the table” as soon as September.
“The short-lived satisfaction of Fed Chief Powell communicating decent odds of a September rate cut has turned sour as investors are now panicking that the central bank isn’t trimming soon enough,” Jose Torres, senior economist at Interactive Brokers, said in a note. “Bears kicked off August by capitalizing on much weaker-than-expected ISM-manufacturing and unemployment claim prints to push equities deep into the red in dramatic U-turn fashion,” he said.
“Market players are also worried that the U.S. is among the last to begin accommodating monetary policy, with the Bank of England narrowly deciding to reduce borrowing costs,” Torres said.
Investors pushed into U.S. government debt, leading the 10-year Treasury yield (US10Y) down 6 basis points to 3.98%, falling below 4% for the first time since February. The 2-year yield (US2Y) fell 9 basis points to 4.17%. See how Treasury yields have done across the curve on the Seeking Alpha bond page.
The major U.S. averages on Wednesday finished solidly higher, after on the prospect the Fed will start its easing cycle in September.
In the U.K., the Bank of England reduced its benchmark interest rate to 5% from 5.25% Thursday.
Meanwhile, Meta (META) shares rose +4% after Facebook parent company beat expectations for its Q2 top and bottom lines. The social media heavyweight expects Q3 sales of $38.5B-$41B, compared with $39.2B consensus.
Traders will also be on the lookout for results from tech giants Apple (AAPL) and Amazon (AMZN), due after the market closes Thursday.
Elsewhere on the economic side, the U.S. employers announced 25,885 job cuts in July, a 47% decline from the 48,786 announced in June.
Nonfarm labor productivity advanced 2.3% Q/Q in Q2, stronger than the 1.7% increase expected.
Among individual stocks, Moderna (MRNA) shares tumbled +21% after the biotech firm slashed its FY2024 outlook for product sales, citing lower COVID vaccine sales.
Carvana (CVNA) climbed +10% after the online auto seller swung to a quarterly profit of $0.14 per share.
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