U.S. stocks closed lower on Thursday, snapping the longest winning streaks for the Nasdaq and S&P 500 in two years, as Treasury yields climbed after a disappointing auction of 30-year bonds and comments from Federal Reserve Chair Jerome Powell. But as it has every day this week, the Canadian stock market diverged in performance, with the S&P/TSX Composite Index ending with gains as commodity prices rebounded and investors cheered upbeat corporate earnings.
Powell said central bank officials “are not confident” interest rates are high enough to tame inflation, and may not get much more help from improvements in the supply of goods, services and labour.
U.S. stocks had moved slightly lower prior to Powell’s comments as yields climbed after a weak auction of US$24 billion in 30-year Treasuries with demand for the debt at 2.24 times the bonds on sale.
The benchmark 10-year Treasury note yield by late afternoon was up 12.8 basis points at 4.636%. The Canadian 10-year government bond yield, which takes much of its direction from its U.S. counterpart, was up an even steeper 18 basis points, to 3.890%. While a large one-day move, the yield is still below a 16-year high of 4.292% reached in early October.
Powell is “taking a hawkish viewpoint again,” said Peter Cardillo, chief market economist at Spartan Capital Securities in New York. “He’s reassuring the market that the fight against inflation has not been won a and if economic conditions warrant, they won’t hesitate to hike rates again,” he said.
“If you add up all the remarks, Powell is telling the market not to get too complacent and that’s putting some pressure on stocks.”
Most traders are betting the Fed will keep interest rates unchanged this year, even after Powell’s comments, but now see rates cuts starting later in 2024, according to the CME Group’s FedWatch Tool.
Several policymakers had already struck a hawkish tone this week to deter rate cut expectations, with some stressing a data-dependent approach to policy.
Meanwhile, a Labor Department report showed U.S. jobless claims edged lower last week to 217,000, indicating layoffs have yet to accelerate despite signs of a cooling labor market.
The Dow Jones Industrial Average fell 220.33 points, or 0.65%, to 33,891.94, the S&P 500 lost 35.43 points, or 0.81 %, to 4,347.35 and the Nasdaq Composite lost 128.97 points, or 0.94 %, to 13,521.45.
In Canada, the TSX ended up 57.20 points, or 0.3%, at 19,587.41 after three straight days of declines. The index ended well off its highs for the day.
The energy sector rose 1.5% as the price of oil rebounded from a four-month low the previous day, settling 0.5% higher at $75.74 a barrel.
Shares of Suncor Energy climbed 3.7% after the company reported higher-than-anticipated quarterly profit, helped by strong refining margins and higher sales volumes from its oil sands operations.
Uranium miner NexGen Energy received Saskatchewan’s environmental assessment approval to proceed with development of its 100%-owned Rook I Project. Its shares added 7.1%.
The materials group advanced 0.8% as gold and copper prices rose.
Stelco Holdings was also a standout. Its shares jumped 12.5% after the steelmaker reported better-than-anticipated third-quarter results.
Rogers Communications shares rose 3.2% as the telecom operator beat third-quarter profit estimates.
Manulife Financial shares were up 3% after the insurer posted better-than-expected earnings for the third quarter, boosted by sales in Asia and higher returns on investment.
The U.S. stock market declines Thursday marked the biggest one-day percentage drops for the S&P and Nasdaq since Oct. 26, and the largest for the Dow since Oct. 27. Nearly all 11 major S&P sectors were lower, led by declines in healthcare And consumer discretionary with declines of nearly 2% each.
U.S. equities have rallied on softening economic data, including the monthly payrolls report, and as U.S. Treasury yields retreated from multi-year highs on the view that the Fed’s most recent policy meeting signaled the central bank was done with its rate hike cycle.
After Wall Street’s strong rally last week, the pace of gains slowed, and the declines on Thursday snapped an eight-session streak of advances for the S&P 500 and nine-session winning streak for the Nasdaq, the longest for each since November 2021.
Walt Disney jumped 6.9% on a quarterly profit beat and as Hollywood actors reached a tentative agreement with major studios.
All 11 of the major S&P sectors were lower, led by declines in healthcare and consumer discretionary with declines of about 2% each.
Among other stocks, semiconductor firm Arm Holdings dropped 5.2% on a downbeat third-quarter sales forecast.
Declining issues outnumbered advancers by a 2.7-to-1 ratio on the NYSE while on the Nasdaq, declining issues outnumbered advancers by a 2.8-to-1 ratio. The S&P 500 posted 19 new 52-week highs and 12 new lows while the Nasdaq recorded 47 new highs and 321 new lows. Volume on U.S. exchanges 11.36 was billion shares, compared with the 10.97 billion average for the full session over the last 20 trading days.
Reuters, Globe staff