“Nasdaq and S&P 500 Break Winning Streaks Amid Powell’s Cautious Words and Treasury Auction Fallout“
U.S. stocks faced a downturn on Thursday, ending the Nasdaq and S&P 500’s longest winning streaks in two years. Federal Reserve Chair Jerome Powell’s cautious remarks and a lackluster Treasury auction of 30-year bonds fueled the decline in the U.S.
Powell expressed concerns about inflation control. He stated that central bank officials are unsure if interest rates are high enough to effectively combat inflation. He highlighted that improvements in the supply of goods, services, and labor might not provide substantial assistance.
Powell’s somewhat hawkish stance suggested a readiness to raise interest rates if economic conditions warrant it, injecting caution into the market. This has raised concerns among investors about the potential impact on various sectors.
Before Powell’s comments, the market saw a slight dip. The cause was a disappointing auction of $24 billion in 30-year Treasury bonds and a surge in bond yields. The lackluster auction had demand at 2.24 times the number of bonds on sale. This raised concerns among investors about market stability.
The benchmark 10-year Treasury note yield rose by 12.8 basis points to 4.636%, reaching as high as 4.654% during the day.
Nasdaq, S&P 500 and Dow Jones Industrial Averages
Peter Cardillo, Chief Market Economist at Spartan Capital Securities, noted Powell’s cautious tone, stating that Powell signaled the market not to become too complacent, putting pressure on stocks.
The Dow Jones Industrial Average fell 220.33 points (0.65%) to 33,891.94. The S&P 500 lost 35.43 points (0.81%) to 4,347.35, and the Nasdaq Composite dropped 128.97 points (0.94%) to 13,521.45. These declines marked the most significant one-day percentage drops for the S&P and Nasdaq since October 26 and for the Dow since October 27.
Airline stocks dropped by 2.5% on the NYSE Arca Airline Index, showing a downturn in that sector. Pharmaceutical and biotechnology stocks also faced substantial weakness, with the NYSE Pharmaceutical Index and the NYSE Arca Biotechnology Index slumping by 2.5% and 2.4%, respectively.
In contrast, networking stocks showed some resilience amid a broader downturn. Infinera (INFN) stood out with a 14.6% surge after the telecom equipment company raised its third-quarter guidance.
Despite a late-afternoon recovery from the day’s lows, the major averages closed firmly in negative territory.
As the market processed Powell’s remarks, stocks showed a lack of direction during morning trading. However, the benchmarks faced considerable pressure in the afternoon. The Nasdaq and S&P 500, in particular, saw their longest winning streaks snapped in two years.
Powell’s Commentary on U.S. Inflation
Powell’s commentary on U.S. monetary policy deepened the market downturn. He acknowledged a recent slowdown in U.S. inflation but highlighted that it still exceeds the Fed’s 2% target. Powell expressed the Fed’s uncertainty about achieving a sufficiently restrictive monetary policy to bring inflation down to 2% over time.
Asian Markets on Thursday
Overseas, Asian-Pacific stock markets mostly moved higher on Thursday, with Japan’s Nikkei 225 Index surging by 1.5% and South Korea’s Kospi edging up by 0.2%. European markets also saw gains, with the French CAC 40 Index jumping by 1.1%, the German DAX Index advancing by 0.8%, and the U.K.’s FTSE 100 Index rising by 0.7%.
