Wall Street's major indexes closed on Thursday as concerns mounted ahead of the closely watched monthly nonfarm payrolls numbers due on Friday that the Federal Reserve'sFederal Reserve's aggressive interest rate stance will lead to a recession.
Markets took comfort from the data showing weekly jobless claims rose by the most in four months last week, raising a glimmer of hope that the Fed could ease the implementation of the fastest and highest jump in rates since March.
The equity market has been slow to acknowledge a message from Fed officials that rates will go higher for longer until inflation is clearly slowing.
On Thursday, Chicago Fed President Charles Evans said policymakers expect to deliver 125 basis points of rate hikes before the end of the year, as inflation readings have been disappointing.
Jason Pride, chief investment officer for private wealth at Glenmede in Philadelphia, said the market has been slowly getting the message from the Fed.
There is a chance that the Fed will push the economy into a recession in order to bring inflation down, according to Pride. We don't think the markets have picked up on this. Pride sees a mild recession, but there has been a 15% decline in earnings in the average recession, suggesting the market could fall further. The S&P 500 has declined 22% from its peak on January 3.
After the rally on Monday and Tuesday, the three major indexes were poised to make a weekly gain, despite the day's decline.
The labor market is tight even as demand starts to cool amid higher rates. The non-farm payrolls report on September will help investors gauge whether the Fed will change its rate-hiking plans.
Money markets are pricing in an almost 86% chance of a fourth straight 75 basis-point rate hike when policymakers meet on November 1 -- 2.
Some people don't believe in a hard landing.
Dave Sekera, chief US market strategist at Morningstar Inc., said growth will remain sluggish for the foreseeable future and likely won't start to reaccelerate until the second half of 2023, but he doesn't see a major downturn.
Sekera said we're not forecasting a recession. The markets are looking for clarity as to when economic activity will reaccelerate and make a sustained rebound.
He said they are looking for strong evidence that inflation will start to trend down, moving back towards the Fed's 2% target.
Ten of the 11 major S&P 500 sectors fell, due to a 3.3% decline in real estate. Other indices fell, including semiconductors, small caps and Dow transports. Growth shares fell 0.76%, while the value dropped 1.18%.
Oil prices were at three week highs after the Organization of the Petroleum Exporting Countries and its allies agreed to reduce production targets by 2 million barrels per day, the largest reduction since 2020. The Dow Jones Industrial Average fell 346.93 points, or 1.15%, to 29,926. The S&P 500 lost 38.76 points, or 1.02%, to 3,744 on 94. 52 and the Nasdaq Composite dropped 75.33 points, or 0.68%, to 11,073. As Apollo Global Management Inc. and Sixth Street Partners, which had been looking to provide financing for Elon Musk's $44 billion Twitter deal, are no longer in talks with the billionaire.
After the launch of Google's new phones and its first smartwatches, Alphabet Inc closed flat.
The US exchanges' volume was 10.57 billion shares, compared to the 11.67 billion average for the full session over the past 20 trading days.
The declinersfavored declining issues because of a 1.42 to 1 ratio on the NYSE, as opposed to a 2.32 to 1 ratio on the NYSE.
The S&P 500 posted three new 52 week highs and 31 new lows and the Nasdaq Composite posted 46 new highs and 118 new lows.