After the previous negative day, due to the release of falling retail sales and the latest report on the US economy, which indicated that the number of jobless claims fell to 190,000, a figure lower than expected, the US stock indexes suffered heavy casualties on Thursday.
No one had anticipated such a decline in US retail sales in December compared to November, especially during the holiday season. Inflation affects Americans’ purchasing power, as they have less money to spend. To slow inflation, it is necessary to raise interest rates, with the result that the Dow Jones closed Thursday down 0.76% at 33,044.56, the S&P500 -0.76% at 3,898.85 and the Nasdaq lost 0.96% to 10,852.27.
Microsoft, which had posted a 1.9% decline after announcing it was cutting 10,000 employees, also fell even steeper on Thursday to close at 231.93-3.88 (-1.65%).
Indications from US markets were not encouraging on Thursday morning. Dow Jones futures are down 0.1% from their initial level. S&P 500 and Nasdaq 100 futures both fell 0.1%. Additionally, crude oil futures recorded a 1% decline. The price of gold rose a quarter of a percentage point to $1.911 an ounce; US WTI oil fell 1.5% to $78.3 a barrel.
The euro traded at 1.0796, and the yen gained 0.76% to 127.94 after a drop recorded the day before, while the yield on the 10-year US treasury fell to 3.325% from 3.375 %. Wall Street futures are currently in negative territory, down 0.15% on average.
Declining inflation and a sharp economic downturn led to expectations of less aggressive rate hikes by the Federal Reserve and a near-term standoff but also heightened fears of an economic downturn. James Bullard of the St. Louis Fed and Loretta Meister of the Cleveland Fed both said they believe the central bank will raise rates above 5%. This is in line with the Federal Reserve’s forecast for a “final rate” of 5.1% but slightly higher than market expectations.
The stock market, which started with a slight rally on Wednesday, suddenly took a bearish turn as analysts weighed economic information and Federal Reserve statements. Markets, with producer price index, retail sales, and industrial production all posting substantial more-than-expected declines in December in December, continued to slide on Thursday.
The stock market was gaining ground Wednesday, but investors changed their minds after studying economic reports and Federal Reserve statements. Also, the US unemployment rate fell to 190,000, lower than expected and this caused US stock indexes to drop. The lower inflation rate and the sudden economic downturn established the anticipation of a slower rate hike by the Fed. A short-term downturn also increased fears of a recession.
Despite the partial recovery at the end of the day, US stocks closed Thursday in negative territory: o S&P 500 lost 0.76% to 3,898.85, the Dow Jones fell by 0.76% to 33,044.56, and the Nasdaq returned -0.96% to 10,852.27.
