U.S. stocks fell for a fourth straight session Thursday as economic data failed to dispel expectations that the Federal Reserve would keep hiking interest rates for longer than initially anticipated.
Despite a second report showing that services sector growth slowed in October, economic statistics released on Thursday still showed a solid labor market. This allowed the Fed to continue raising interest rates aggressively.
In response to the Federal Reserve's speech on Wednesday, Fed Chair Jerome Powell said that it was "very premature" to consider stopping rate hikes. This caused stocks to decline, while US bond yields and the US dollar increased. This trend continued on Thursday.
"Years ago the Fed's job was to take away the punch bowl and that balance is always a very difficult transition, you want the economy to slow to keep inflation from getting out of hand but you want enough earnings to support stock prices," Rick Meckler, partner at Cherry Lane Investments in New Vernon, New Jersey said.
The Nasdaq Composite plummeted 181.86 points, or 1.73 percent, to 10,342.94, the S&P 500 lost 39.8 points, or 1.06 percent, to 3,719.89, and the Dow Jones Industrial Average dropped 146.51 points, or 0.46 percent, to 32,001.25. Although traders are nearly evenly divided between the probability of a rate hike of 50 basis points and 75 basis points in December, the peak Fed funds rate is now expected to rise to at least 5%, vs an earlier expectation of a rise to the range of 4.50 to 4.75 percent.
Investors will keenly watch the nonfarm payrolls report, which is coming on Friday, for any indication that the Fed's rate hikes are starting to noticeably slow the economy. With Apple down 4.24 percent and Alphabet down 4.07 percent respectively, the technology and communication services sectors had the poorest session performance as a result of the rise in yields.
Gains in industrial stocks like Boeing, which increased 6.34%, and Caterpillar, a manufacturer of heavy equipment, which increased 2.20%, helped to contain losses on the Dow. Roku and Qualcomm both experienced declines of 4.57 and 7.66%, respectively, as a result of their holiday quarter predictions falling short of expectations.
According to data from Refinitiv, with almost 80% of S&P 500 businesses having reported profits, the anticipated growth rate is now 4.7%, up from 4.5% at the beginning of October. Roku and Qualcomm both experienced declines of 4.57 and 7.66%, respectively, as a result of their holiday quarter predictions falling short of expectations.