Most U.S. stocks fell Thursday after a round of mixed economic data, putting them on track for their worst week since April.
The Standard & Poor’s 500 fell 0.3% for a third straight session and the Dow Jones industrial average fell 0.5%. The Nasdaq Composite fared better than the broader market, adding 0.3% thanks to gains in Tesla and other major technology stocks.
Treasury yields also fell slightly after mixed economic reports in the bond market. One suggested that US companies slowed hiring last month, well below economists’ forecasts for an acceleration. However, another report said that fewer US workers applied for unemployment benefits last week than expected. This is because the number of layoffs is still small.
A report released this morning offered further optimism, saying business growth in the financial, health care and other services sectors last month was stronger than economists had expected.
“Overall, business is good,” said one Institute for Supply Management respondent. “However, there is concern about reduced foot traffic at restaurants and other locations where our products are sold.”
Stocks struggled this week after another U.S. manufacturing report stoked concerns about a slowdown in the U.S. economy and how much it could hurt corporate profits. This led to a highly anticipated report on Friday.
The U.S. government will then say how many jobs American employers added last month, and economists expect the pace of employment to accelerate. The labor market’s performance may dictate how many interest rate cuts the Federal Reserve proposes at its next meeting later this month.
After keeping its key interest rate at a two-decade high to curb inflation, the Federal Reserve has signaled it will begin cutting rates to protect the labor market and prevent the broader economy from sliding into a recession. The question on Wall Street is whether it will be too little or too late.
In the bond market, the 10-year Treasury yield fell to 3.73% from 3.76% late Wednesday. That’s down from 4.70% in April, a significant move for the bond market.
Perhaps most importantly for investors, the 10-year bond yield is flirting with the end of a more than two-year period in which it has been lower than the two-year Treasury yield. This is an unusual phenomenon called an “inverted yield curve.” Typically, long-term yields are higher than short-term yields.
Many investors view the inverted yield curve as a warning of an impending recession, and the inversion has been a key talking point for market bears since the summer of 2022. The yield curve often returns to pre-recession normality as traders strengthen their expectations for future interest rate cuts by the Federal Reserve. But the 2020 pandemic has produced recessions and subsequent recoveries that often defy predictions and conventional wisdom.
The yield on two-year Treasury bonds was 3.74%, slightly higher than the 10-year yield.
On Wall Street, Old Dominion Freight Line was one of the biggest fallers in the S&P 500 after reporting weak earnings trends in August. It pointed to “weakness in the domestic economy” along with declining fuel surcharges. The carrier’s shares fell 4.9%.
Verizon shares fell 0.4% after announcing plans to buy Frontier Communications in a $20 billion deal to bolster its fiber network. Frontier Communication, which rose nearly 38% the day before, returned 9.5%.
On the winning side of Wall Street was Tesla. It rose 4.9% after it laid out a roadmap for the next development of artificial intelligence, including the possibility of so-called “full autonomy” in Europe and China.
JetBlue Airways flew 7.2% more after raising its summer profit forecast. It said it was seeing improved performance in the Latin American region in particular and had picked up business when technology outages forced rivals to cancel flights in July.
Overall, the S&P 500 fell 16.66 points to 5,503.41. The Dow Jones fell 219.22 points to 40,755.75 and the Nasdaq gained 43.36 points to 17,127.66.
Overseas stock markets were mixed in Asia and Europe.
Japan’s Nikkei 225 fell 1.1% after strong wage growth data fueled expectations of another interest rate hike.
Choe writes for the Associated Press.
