U.S. stocks fell, putting indexes on course to fall for a fifth consecutive day, as investors continued to brace for higher-for-longer interest rates.
The S&P 500 shed 1% Thursday, while the Nasdaq Composite dropped 2.1% and the Dow Jones Industrial Average lost 0.4%. The major indexes suffered their fourth day of losses Wednesday, continuing a selloff that saw them end August with declines of between 4% and 5%.
The first trading day of a new month often sees stocks rise as investment plans inject new money into the market. But right now the market is looking at relatively strong economic reports, like this morning’s jobless-claims data, and expecting they will compel the Federal Reserve to keep raising rates aggressively, said Thomas Hayes, chairman of Great Hill Capital.
“The bears are going to be in control until the 13th,” he said, referring the date of the next inflation report.
Comments from Federal Reserve Chairman
Jerome Powell
last week that doubled down on his message that interest rates must continue rising to tame inflation—even if the economy suffers—have sent stocks tumbling. The declines have reversed much of the gains made during a summer rally that had lifted stocks and bonds from their lows.
The fall has come as investors reassessed hopes that the Fed could soon ease off from its campaign of interest-rate increases. Instead, many are girding for a lengthier period of higher interest rates, though expectations of when the Fed will start cutting interest rates are likely still too hopeful, said
David Donabedian,
chief investment officer of CIBC Private Wealth US.
“There was too much Fed optimism. The idea that the Fed was getting close to the end of tightening and would begin cutting rates next spring never really made sense to us,” he said.
“I feel a bit more optimistic about the market now over the next three to six months. There has been a reality check and a reassessment of expectations, and I prefer it when the market is in a sober mood rather than a euphoric one,” he said.
Yields on benchmark U.S. government bonds climbed to their highest levels since June. The yield on the 10-year Treasury note rose to 3.264% from 3.131% on Wednesday.
Thursday’s data provided new clues on the health of the economy and the employment market ahead of Friday’s highly-anticipated jobs report. U.S. workers’ filings for unemployment benefits fell last week, suggesting layoffs are holding at a low level in a tight job market.
And a survey of U.S. manufacturing activity for August came in stronger than expected. The ISM Manufacturing PMI came in at 52.8, even with July and above expectations of 51.8.
In corporate news, shares of
Okta
fell 35% after the company disclosed some merger integration issues after its acquisition of Auth0, including a higher rate of employee attrition.
Nvidia
fell 12% after the company said it could lose as much as $400 million in quarterly sales after the U.S. imposed new licensing requirements on shipments of some of its most advanced chips to China.
Bed Bath & Beyond
lost 8% after the company said it would close roughly 20% of its namesake stores, cut its workforce and sell stock to raise money to stabilize the business.
In commodity markets, oil extended a streak of declines, falling for a third consecutive day, as worries about global demand mount. U.S. crude futures fell 3% to $86.88.
Fresh Covid-19 lockdowns in China are threatening to weaken oil demand, adding to jitters about flagging global growth. China’s city of Chengdu with a population of 21 million became the latest to impose restrictions, ordering residents to stay at home from Thursday afternoon, with citywide Covid testing planned through Sunday.
In foreign exchange, the WSJ Dollar Index was up 0.8% at 101.01. That put the index on course for its highest end-of-day reading since April 2002, according to Dow Jones Market Data. Concurrently, the yen fell to 140.19 against the dollar, its weakest level against the dollar since 1998.
Metals prices are also slumping, dragged down by the stronger dollar—which makes dollar-denominated metals more expensive for holders of other currencies—and rising real yields. As August ended, gold reached its longest monthly losing streak since 2018, while copper hit its longest monthly losing streak since 2008. Both metals fell Thursday by 1% or more.
Major U.S. stock indexes closed out August with losses of 4% or more.
Photo:
Michael M. Santiago/Getty Images
Overseas, major indexes fell across the board. In Europe, the pan-continental Stoxx Europe 600 retreated 1.8%, led by losses among mining and resource stocks.
In Asia, stocks closed lower, with Japan’s Nikkei 225 shedding 1.5% and the Hang Seng in Hong Kong dropping 1.8%. In mainland China, the Shanghai Composite lost 0.5%.
—Raffaele Huang contributed to this article.
Write to Will Horner at william.horner@wsj.com
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