NEW YORK – Following one of its most volatile days this year, the U.S. stock market showed signs of recovery on Thursday, albeit with mixed results by the day's end. The Dow Jones Industrial Average managed to gain mere fractions, up less than 0.1%, yet it marked the end of its longest losing streak since 1974. The S&P 500 concluded the day down 0.1%, illustrating how quickly market sentiment can shift.
This recent volatility was spurred by the Federal Reserve's announcement, which signaled fewer interest rate cuts than anticipated for 2025. The Fed's cautious outlook tempered expectations for lower borrowing costs, which historically have buoyed market activity. On Wednesday, stocks suffered their worst single-day performance since the summer, with the S&P 500 dropping dramatically by 2.9%.
Jerome Powell, Chair of the Federal Reserve, described the adjustment as necessary, explaining, “Interest rates may not decrease as initially expected, with predictions now narrowing to just one or two cuts next year.” Wall Street traders had responded adversely to what was interpreted as a "hawkish cut." This hawkish tone shifted several dynamics, affecting investor confidence and pushing certain stock indexes to their limits.
By later trading on Thursday, resilience was demonstrated as the S&P 500 saw gains reaching 0.2% before closing slightly lower. The Nasdaq composite also registered fluctuations, initially rising by 0.3% but eventually falling 0.1%. The recovery, albeit tentative, signals traders’ persistent interest and hope for potentially favorable economic conditions.
Helping to lift investor sentiment was Darden Restaurants, known for its chains like Olive Garden and LongHorn Steakhouse, which surged 15.1%, following strong earnings results. Darden reported exceeding analysts’ expectations, not only on profits but also for its revenue outlook for the coming fiscal year. Accenture also shone brightly, recording 6.7% gains due to positive earnings reports transcending global expectations.
While some companies enjoyed the spotlight, others faced significant declines. Micron Technology saw its shares tumble 16.7% on weaker revenue forecasts, even after presenting earnings surpassing expectations for the previous quarter. “Demand from consumers remains weak, and we anticipate continued pressure,” said CEO Sanjay Mehrotra, reflecting caution amid the company’s quarterly performance.
Simultaneously, Lamb Weston, which specializes in potato products, saw its stock drop by 22.6%. The company faced challenges after missing profit and revenue targets, paired with lowered financial guidance citing diminishing demand for frozen products.
Meanwhile, on the bond market front, Treasury yields exhibited mixed movements. The yield on the 10-year Treasury note rose to 4.57% from 4.52% due to enhanced expectations around the Fed's policy adjustments, contrasting with the two-year Treasury yield, which eased slightly to 4.31%. This dynamic hinted at uncertainty surrounding future rate adjustments and contributed to interest rates remaining high.
Internationally, stock markets reacted similarly, with London's FTSE 100 falling by 1.1% following the Bank of England's decision to maintain its interest rates, reflecting inflationary struggles and stagnant growth within the UK economy.
Locally, economic indicators remained mixed. The Bureau of Economic Analysis reported unexpected third-quarter productivity growth at 3.1%, reinforcing the view of underlying economic resilience. Further data indicated a decrease in unemployment claims, signaling stability. Nevertheless, concerning manufacturing reports from the mid-Atlantic region raised alarm bells about potential contractions, contradicting the upswing seen elsewhere.
The housing market, long affected by elevated mortgage rates linked to Fed policies, faced challenges of its own. Homebuilder stocks were affected, with Lennar Corp. reporting weaker-than-expected results and significantly falling shares. CEO Stuart Miller stated, “While demand remained strong, affordability constraints led to diminished results due to rising mortgage rates.”
Despite fluctuations, the U.S. stock market remains attractive to many investors, particularly as 2023 has poised to be one of the best years for stock performance this millennium, with the S&P 500 still maintaining impressive gains overall.
Trading participates on Wall Street are now focused on how economic data over the coming months will influence Federal Reserve decisions surrounding interest rate policies. With expectations still high based on underlying economic trends and corporate performances, many investors are left wondering how this complex economic narrative will play out.
