U.S. stock markets closed lower on Thursday following profit booking by investors on mixed economic data. However, market participants remained hopeful on another round of interest rate cut this month. All three major stock indexes ended in negative territory.
How Did The Benchmarks Perform?
The Dow Jones Industrial Average (DJI) tumbled 0.5% or 234.44 points after a choppy session to close at 43,914.12. The blue-chip index recorded a six-day losing streak. Notably, 16 components of the 30-stock index ended in negative territory while 14 in positive zone.
The major loser of the Dow was UnitedHealth Group Inc. UNH. The stock price of this medical insurer tanked 3.3%. UnitedHealth Group currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The tech-heavy Nasdaq Composite finished at 19,902.84, sliding 0.7% or 132.05 points due to weak performance by technology behemoths. The S&P 500 dropped 0.5% to finish at 6,051.25. Nine out of 11 broad sectors of the broad-market index ended in negative territory while two in positive zone.
The Energy Select Sector SPDR (XLE), the Health Care Select Sector SPDR (XLV) and the Consumer Discretionary Select Sector (XLY) fell 0.8% each. On the other hand, the Consumer Staples Select Sector SPDR (XLP) rose 0.3%.
The fear-gauge CBOE Volatility Index (VIX) was up 2.5%% to 13.92. A total of 13.61 billion shares were traded on Thursday, lower than the last 20-session average of 14.17 billion. Decliners outnumbered advancers on the NYSE by a 3.11-to-1 ratio. On Nasdaq, a 2.57-to-1 ratio favored declining issues.
Mixed Economic Data
The Department of Labor reported that the producer price index (CPI) for final demand rose 0.4% in November, higher-than-the consensus estimate of 0.2%. The metric for October was revised upward to 0.3% from 0.2% reported earlier. Year over year, PPI increased 3% in the last month, compared 2.6% in October.
Core PPI (excluding volatile food and energy items) also rose 0.2% in November, in line with the consensus estimate. The metric for October was revised downward to 0.2% from 0.3% reported earlier. Core PPI (excluding trade services) was up 0.1% in November. Year over year, Core PPI (excluding volatile food, energy and trade services) increased 3.5% in November, in line with the previous month.
The Department of Labor reported that initial claims increased by 17,000 to 242,000 for the week ended Dec 7, higher than the consensus estimate of 220,000. Previous week’s data was revised upward to 225,000 from 224,000 reported earlier.
Continuing claims (those who have already received government aids and reported a week behind) increased 15,000 to 1.886 million for the week ended Nov 30. The previous week's level remained same at 1.871 million.
High Expectations of December Rate Cut
Following the release of the November inflation and labor data, market participants are more hopeful of another round of reduction in the benchmark lending rate in December.
Market participants believe that gradually reducing inflation rate and solid fundamentals of the U.S. economy will pave the way for a soft landing. The Fed reduced the market interest rate by 75 basis points in September and November to a range of 4.5-4.75%.
The CME FedWatch interest rate derivative tool currently shows a 96.4% probability that central bank will cut the Fed fund rate by another 25 basis points in December. This probability was around 66% at the beginning of last week. If this materializes, total reduction in the Fed fund rate will be 1% in 2024.
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