U.S. Stocks Continue To See Significant Weakness In Afternoon Trading

Stocks moved notably lower early in the session on Thursday and continued to see significant weakness in afternoon trading. The major averages are extending the sell-off seen late in the previous session, with the Nasdaq and the S&P 500 falling to their lowest intraday levels in a month.

Currently, the major averages are off their lows of the session but still firmly negative. The Nasdaq is down 139.45 points or 1.0 percent at 13,329.68, the S&P 500 is down 41.03 points or 0.9 percent at 4,361.17 and the Dow is down 153.65 points or 0.5 percent at 34,287.23.

Concerns about the outlook for interest rates continue to weigh on Wall Street following the Federal Reserve’s monetary policy announcement on Wednesday.

While the Fed left interest rates unchanged as widely expected, the central bank forecast another rate hike before the end of the year as well as keeping rates at elevated levels for longer than previously anticipated.

“12 of 19 governors at this point currently favor one more interest rate increase in the next two meetings before the end of the year,” said Alex McGrath, Chief Investment officer for NorthEnd Private Wealth. “Additionally the dot plot for rate expectations in 2024 was higher than it had been in previous meetings signaling a hawkish outlook for rates next year, cementing their higher for longer stance.”

He added, “Heading into the fourth quarter with rate expectations remaining elevated, we are more than likely in for a choppy end of the year as the markets digest an outlook less favorable for the growth assets that have driven the market for 2023.”

The worries about interest rates have contributed to a surge by treasury yields, with the yield on the benchmark ten-year note jumping to its highest level in almost sixteen years.

Adding to the concerns about interest rates, the Labor Department released a report this morning showing first-time claims for U.S. unemployment benefits unexpectedly fell to a seven-month low in the week ended September 16th.

The report said initial jobless claims dipped to 201,000, a decrease of 20,000 from the previous week’s revised level of 221,000.

Economists had expected jobless claims to inch up to 225,000 from the 220,000 originally reported for the previous week.

With the unexpected decrease, jobless claims fell to their lowest level since hitting 199,000 in the week ended January 28th.

However, Nancy Vanden Houten, Lead .S. Economist at Oxford Economics, said, “The claims data don’t change our call for the Fed to keep rates steady before embarking on a very gradual pace of rate cuts in mid-2024.”

“A sharp rise in unemployment and claims isn’t a prerequisite for the Fed to stop raising rates,” she added. “Fed Chair Powell yesterday noted that the labor market is coming into better balance without a rise in the unemployment rate.”

Sector News

Interest rate-sensitive commercial real estate stocks are seeing substantial weakness on the day, resulting in a 2.2 percent plunge by the Dow Jones U.S. Real Estate Index. The index has tumbled to its lowest intraday level in almost four months.

Considerable weakness also remains visible among housing stocks, with the Philadelphia Housing Sector Index slumping by 2.0 percent after hitting a three-month intraday low.

The weakness in the sector comes after the National Association of Realtors released a report unexpectedly showing a continued decrease in existing home sales.

NAR said existing home sales fell by 0.7 percent to an annual rate of 4.04 million in August after tumbling by 2.2 percent to an annual rate of 4.07 million in July. Economists had expected existing home sales to rise to a rate of 4.10 million.

Networking stocks also seeing significant weakness on the day, as reflected by the 1.9 percent drop by the NYSE Arca Networking Index.

Retail, brokerage and steel stocks have also shown notable moves to the downside amid broad based weakness on Wall Street.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region moved mostly lower during trading on Thursday. Japan’s Nikkei 225 Index dove by 1.4 percent, while China’s Shanghai Composite Index slid by 0.8 percent.

The major European markets also saw significant weakness on the day. While the French CAC 40 Index plunged by 1.6 percent, the German DAX Index tumbled by 1.3 percent and the U.K.’s FTSE 100 Index fell by 0.7 percent.

In the bond market, treasuries have moved sharply lower amid concerns about the outlook for interest rates. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, is up by 12.3 basis points at 4.472 percent.

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