Meta Platforms as a Bright Spot
Stocks Tumble After Weak Economic Data as 10-Year Yield Falls Below 4%
Anticipation of July Jobs Report and Big Tech Earnings
US stocks faced significant selling pressure on Thursday afternoon, driven by weak economic data and a sharp sell-off in chip stocks. This downturn came a day after the Federal Reserve signaled a likely rate cut in September.
The S&P 500 (GSPC) dropped nearly 1.5%, while the tech-heavy Nasdaq Composite (IXIC) erased earlier gains to fall almost 2.5%, following substantial gains on Wednesday. The Dow Jones Industrial Average (DJI) also declined, losing nearly 600 points or 1.4%. The 10-year Treasury (TNX) yield fell below the 4% mark for the first time since February, settling near 3.98%.
Key Points
1. Meta Platforms as a Bright Spot
Meta (META) stock surged about 5% after the social media giant reported better-than-expected results on Wednesday afternoon. However, this positive performance was an outlier amid the broader market decline.
2. Weak Economic Data
The latest ISM data released on Thursday indicated that the US manufacturing sector further contracted in July. Additional reports showed that jobless claims rose to an 11-month high last week, and construction spending unexpectedly declined in June. These figures signaled a cooling US economy, raising concerns about the potential recession risk driven by historically high interest rates.
3. Market Reaction to Fed Signals
Initially, stocks moved higher after Fed Chair Jerome Powell's comments bolstered market confidence in a potential September interest-rate cut, with traders anticipating a 25-basis-point reduction and some betting on a 50-basis-point move. However, the negative economic data quickly overshadowed this optimism.
4. Anticipation of July Jobs Report and Big Tech Earnings
Investors are now focused on the release of the July jobs report on Friday, which is expected to provide further evidence of an economic slowdown that could influence Fed policy. Additionally, quarterly results from Big Tech names like from Apple (AAPL) and Amazon (AMZN) are due after the bell. These reports will test the bullish sentiment driven by Meta's strong performance and the broader AI trade, which had been undermined by earlier disappointing earnings from other major tech firms.
5. Crypto Market Movements
Bitcoin (BTC-USD) prices dropped about 5% on Thursday, continuing a slide from around $67,000 to below $63,000 that began after US equity markets closed on Wednesday. The approval of bitcoin and ether ETFs by the SEC means these instruments are likely to become part of more traditional investment portfolios, raising the profile of crypto as both a market barometer and a leading indicator of underlying market unease.
Conclusion
The stock market's recent volatility underscores the fragile balance between investor optimism and economic realities. Weak economic data and significant movements in tech stocks, alongside signals from the Federal Reserve, have created a complex landscape for investors. With key economic reports and earnings results from major tech companies on the horizon, the market's path to September will likely be marked by continued uncertainty and caution. Investors should remain vigilant and consider these developments when making investment decisions.