U.S. stocks experienced a decline on Thursday as investors awaited Federal Reserve Chair Jerome Powell’s upcoming speech. The S&P 500 recorded its worst day in two weeks, falling 0.9% after a recent rally. The Dow Jones Industrial Average dropped 0.4%, while the Nasdaq composite sank 1.7%. The bond market’s increasing pressure due to rising Treasury yields, coupled with mixed data on the U.S. economy, contributed to the stock market’s downturn.
One report revealed that more U.S. workers applied for unemployment benefits last week than anticipated, indicating a potential cooling job market. Another report highlighted a divergence in U.S. business activity, with services businesses experiencing growth while the manufacturing sector contracted at a more severe rate. These findings suggest that the U.S. economy is still growing but exhibits some fragility.
The Federal Reserve has raised its main interest rate to the highest level in over two decades in an attempt to control inflation. However, with inflation slowing down, it is widely expected that the Fed will cut interest rates at its next meeting in September, marking the first easing since the COVID-19 crash in 2020. Powell’s speech at the economic symposium in Jackson Hole, Wyoming, on Friday is highly anticipated as it may provide insights into the timing and extent of the rate cuts.
Investors are cautious about the possibility of their expectations for rate cuts being excessive, as has historically occurred. The drop in Treasury yields since spring has aided in lowering mortgage rates, which, in turn, contributed to a halt in the four-month slide of sales for previously occupied homes in July.
While most U.S. companies have reported better-than-expected profits for the spring, some stocks experienced declines. Peloton, an internet-connected exercise company, saw a significant surge of 35.4% after surpassing sales forecasts and reporting lower losses than analysts predicted. Zoom Video Communications, another pandemic winner, also rose by 13% following better-than-expected profit and revenue reports for the latest quarter.
However, more stocks fell than rose on Wall Street, with Nvidia being the heaviest single weight on the S&P 500. The stock fell 3.7% ahead of its highly anticipated profit report scheduled for the following week. Snowflake, despite surpassing analysts’ expectations for profit and revenue, experienced a 14.7% decline due to a lower-than-estimated forecast for product revenue in the current quarter. Advance Auto Parts tumbled 17.5% after falling short of Wall Street’s profit expectations and reducing its full-year profit forecast.