In a turbulent trading session, US equity indexes experienced a significant slump as government bond yields surged, coinciding with a report revealing that jobless claims have reached their highest levels in a year. The Nasdaq Composite Index fell by 1.7%, settling at 17,301.5 points, while the S&P 500 Index dropped 1.1% to close at 5,461.4.
Similarly, the Dow Jones Industrial Average saw a decrease of 1.2%, ending the day at 40,335.8. This decline came despite a positive outlook in premarket trading, where futures for all three indexes were initially higher, particularly the Nasdaq, which had been leading gains. According to a market analysis by D.A.
Davidson, the upward momentum in the S&P 500 and Nasdaq was restrained by a retreat in several mega-cap and semiconductor stocks. As traders prepared for the quarterly earnings reports of major tech firms such as Apple (AAPL), Amazon.com (AMZN), and Intel (INTC), caution dominated market sentiment. Sector performance revealed that energy, industrials, technology, and consumer discretionary were among the hardest-hit, underscoring the volatility in these areas.
However, the communication services sector, which includes social media powerhouse Meta Platforms (META), emerged as a bright spot, leading the gainers in the latter part of the trading day. Economic data released on Thursday highlighted a concerning trend: the Institute for Supply Management's US manufacturing index recorded a decline to 46.8 in July, down from 48.5 in June.
This figure fell short of the anticipated 48.8, as per a survey conducted by Bloomberg, indicating further contraction in the manufacturing sector. On the employment front, initial jobless claims rose to 249,000 for the week ending July 27, up from 235,000 the previous week. Analysts had expected a smaller increase, projecting claims would rise to 236,000.
This latest figure marks the highest level in over a year and coincides with a rise in the four-week moving average, which increased by 2,500 to 238,000 claims. Alongside these employment challenges, Treasury yields faced a steep decline during intraday trading. The yield on the 10-year Treasury note fell by 12.5 basis points to 3.98%, while the two-year yield plummeted 15.3 basis points to 4.18%, reflecting investors' reactions to the evolving economic data. On the policy front, Federal Reserve Chair Jerome Powell indicated that the possibility of a rate cut in September is becoming a 'reasonable base case.' According to a note from Deutsche Bank, he revealed that discussions around rate cuts took place during the Federal Open Market Committee meeting on July 31, suggesting that a continuation of current data trends may align with a potential reduction in interest rates at the September meeting. Notably, shares of Meta Platforms (META) surged by 5.5% intraday, positioning the company as a leader on the Nasdaq.
This reaction followed the announcement that the company experienced a more significant-than-expected increase in Q2 earnings and sales, showcasing continued strength in its business performance despite broader market pressures. In terms of commodities, West Texas Intermediate (WTI) crude oil experienced a decline, dropping 1.2% to settle at $77.01 per barrel, reflecting ongoing shifts in energy market dynamics.
As the market adjusts to these economic cues and corporate earnings results loom ahead, traders remain cautious yet attentive to the unfolding financial landscape..