Federal Reserve’s Stance
Stock Market Today: Stocks Waver After Key Data as Micron Slides
Corporate Earnings and Stock Movements
U.S. stocks were mixed on Thursday as investors digested fresh economic data ahead of a key inflation reading that could influence Federal Reserve policy.
The S&P 500 (^GSPC) fell more than 0.1% after closing near an all-time high on Wednesday. The Dow Jones Industrial Average (^DJI) slipped 0.2%, while the tech-heavy Nasdaq Composite (^IXIC) rose more than 0.1%.
Bullish sentiment around artificial intelligence (AI) has propelled the S&P 500 to a 15% gain this year. However, there are growing concerns that the rally could falter if the tech companies driving most of these gains fail to meet lofty expectations.
Micron and Nvidia Take a Hit
Memory maker Micron (MU) saw its shares slide about 6% in early trading, while Nvidia (NVDA) was down nearly 2%, rekindling fears of a return to the sell-off that unsettled markets last week.
Investors were also parsing a new batch of economic data ahead of the Personal Consumption Expenditures (PCE) inflation print on Friday, which will be pivotal for the Fed's interest rate decisions.
Economic Data Highlights
- Initial Weekly Jobless Claims: The Department of Labor reported 233,000 initial jobless claims, a decrease of 6,000 from the previous week and below the consensus expectation of 235,000. However, continuing jobless claims rose to their highest since late 2021, indicating it’s taking longer for unemployed people to find new jobs.
- GDP Growth: The Bureau of Economic Development's third estimate showed that real gross domestic product (GDP) increased at an annual rate of 1.4% in the first quarter of 2024, slightly higher than the prior estimate of 1.3%.
Corporate Earnings and Stock Movements
- Levi Strauss (LEVI): Shares sank over 16% following a second-quarter revenue miss.
- Nike (NKE): Investors are looking to Nike’s quarterly results for insights into consumer resilience.
Election Volatility and Market Sentiment
The first debate between President Joe Biden and former President Donald Trump is set for Thursday night, which could heighten political tensions. However, historical data suggests that significant market volatility related to presidential elections typically occurs closer to October.
The CBOE Volatility Index (VIX) remains unusually low at less than 13, indicating limited market turmoil so far this year.
Labor Market Cooling?
The number of continuing unemployment claims reached 1.84 million last week, the highest level since November 2021. The four-week moving average of weekly jobless claims increased to 236,000, the highest rate since September 2023, signaling a potential cooling of the labor market.
LPL Financial chief economist Jeffrey Roach interpreted this data as a warning sign of a softening labor market. Oxford Economics lead U.S. economist Nancy Vanden Houten noted that a persistent rise in initial claims could indicate more significant labor market weakness, potentially leading to a higher unemployment rate and supporting a case for the Fed to start lowering rates in September.
Federal Reserve’s Stance
Fed Chair Jerome Powell emphasized the need for "greater confidence" in the inflation trajectory before considering interest rate cuts. Powell stated that while the labor market is gradually cooling and moving toward better balance, it has not yet shown signs of significant concern from the Fed's perspective.
Conclusion
The stock market is experiencing a mix of gains and losses as investors weigh economic data and corporate earnings against potential inflation concerns and Federal Reserve policy. The cooling labor market and upcoming PCE inflation print will be crucial in shaping the Fed's future actions. Investors should stay tuned for further developments as the economic landscape continues to evolve.