Wall Street contended with another volatile session as investors mulled the Federal Reserve’s path of interest-rate hikes while assessing mixed economic data and a slew of earnings reports.
Amazon.com Inc. plunged after hours as its sales forecast trailed estimates. Shares of Apple Inc. also fell postmarket after the firm reported weaker-than-expected iPhone and services sales in its latest quarter.
The S&P 500 closed lower, after swinging between gains and losses for most of the session. The Nasdaq 100 fell more than 1% in regular trading and an exchange-traded fund tracking it slid further after 4 p.m. in New York. Lackluster earnings from several megacap firms this week dampened sentiment and underscored the impact of the Fed’s tightening regime. Meta Platforms Inc. suffered its worst one-day drop since February on Thursday, triggered by burgeoning metaverse costs and a decline in revenue.
Markets were also mixed on U.S. gross domestic product data. The report showed the U.S. economy rebounded after two quarterly contractions, which briefly assuaged concerns of an imminent recession. But it also highlighted that consumer spending remains under pressure because of inflation. Treasuries gained, with the 10-year yield pushing below 4% on speculation of a Fed pivot. The dollar snapped a two-day drop.
The stock and currency markets digested the GDP data differently because it’s difficult to tell what the Fed is planning to do next, said Fiona Cincotta, senior financial markets analyst at City Index.
“The U.S. dollar is reading into this that perhaps it’s going to keep the Fed on that hawkish path for longer,” Cincotta said by phone. “Whereas the stock market seems to be reading it completely differently, almost as if it’s expecting the Fed to be sort of moving toward that less hawkish stuff.”
Economists still expect the Fed to hike by three-quarters of a percentage point for the fourth time in a row when it meets next week. But with recent data highlighting the effects of the Fed’s sharp rate hikes on the economy, investors expect the central bank to slow its pace of tightening after November’s meeting.
“It’s not about a pivot and cutting interest rates,” Alec Young, chief investment strategist at MAPsignals, said in an interview. “It’s just about the Fed becoming more data-dependent and acknowledging there’s already a lot of tightening in the pipeline from all the rate hikes they’ve put through so far.”
Earlier, the European Central Bank lifted its policy rate by 75 basis points — in line with expectations — and signaled more tightening ahead. But ECB officials weren’t unanimous about the size of the interest-rate hike and sought to avoid giving a specific signal on their next move in December, according to people familiar with the matter.
Key events this week:
—Bank of Japan policy decision, Friday
—U.S. personal income, personal spending, pending home sales, University of Michigan consumer sentiment, Friday
Some of the main moves in markets:
Stocks
—The S&P 500 fell 0.6% as of 4 p.m. New York time
—The Nasdaq 100 fell 1.9%
—The Dow Jones Industrial Average rose 0.6%
—The MSCI World index was little changed
Currencies
—The Bloomberg Dollar Spot Index rose 0.4%
—The euro fell 1.1% to $0.9971
—The British pound fell 0.4% to $1.1575
—The Japanese yen rose 0.1% to 146.20 per dollar
Cryptocurrencies
—Bitcoin fell 0.6% to $20,630.98
—Ether rose 0.6% to $1,562.65
Bonds
—The yield on 10-year Treasuries declined seven basis points to 3.93%
—Germany’s 10-year yield declined 15 basis points to 1.96%
—Britain’s 10-year yield declined 17 basis points to 3.40%
Commodities
—West Texas Intermediate crude rose 1.3% to $89.01 a barrel
—Gold futures fell 0.2% to $1,665.50 an ounce
—With assistance from Elaine Chen, Emily Graffeo and Peyton Forte.
