In the most recent trading session on Thursday, US equity indexes experienced a downward trend, surrendering early gains. This shift was primarily influenced by a significant contraction in the manufacturing sector and a spike in jobless claims, both of which focused attention on potential factors that could lead to a monetary policy easing in September. The Nasdaq composite fell by 2.7%, settling at 17,123.2 points, while the S&P 500 index declined by 1.8% to 5,422.5.
The Dow Jones Industrial Average recorded a decrease of 1.6%, closing at 40,171.6 shortly after midday. Among the most impacted sectors were energy, industrials, technology, and consumer discretionary, all of which marked steep declines during the session. Conversely, communication services, which include the social media powerhouse Meta Platforms, along with the real estate sector, were notable gainers on the day. From an economic perspective, the Institute for Supply Management reported that the US manufacturing index dipped to 46.8 in July, down from 48.5 in June.
This reading fell short of Bloomberg's expectations, which had forecasted a figure of 48.8. A reading below 50 is indicative of contraction in the manufacturing landscape. Initial jobless claims in the US rose to 249,000 for the week ending July 27, an increase from the prior week's figure of 235,000.
Analysts had anticipated a jump to only 236,000, according to a Bloomberg survey. As highlighted in a note from D.A. Davidson, the latest jobless claims number represents the highest level seen in over a year, with the four-week moving average also climbing by 2,500 to reach 238,000. Treasury yields plummeted during the trading session, with the 10-year yield decreasing by 12 basis points to stand at 3.98%.
Similarly, the two-year yield fell sharply by 14.9 basis points to 4.19%, reflecting the growing anxiety over weakening economic indicators that have soured market sentiment. On the previous day, Federal Reserve Chair Jerome Powell suggested that a rate cut in September is a plausible scenario, although he did not make any firm commitments.
A note from Deutsche Bank mentioned that Powell indicated discussions regarding rate cuts began during the July 31 meeting, with any continuation of the recent trend likely aligning with a reduction on the agenda for the upcoming September meeting. In a note, Morgan Stanley continued to forecast three rate cuts for the remainder of the year, starting in September, underpinned by core PCE forecasts predicting a three-month annualized rate of 2.1% before the meeting.
The firm indicated that inflation trends are persistently moving lower, suggesting that the Federal Reserve will likely implement cuts at every meeting through mid-2025. Futures for all three major indexes saw premarket increases on Thursday, according to D.A. Davidson's note. However, gains for the S&P 500 and the Nasdaq were constrained due to a pullback in certain mega-cap stocks and semiconductor companies. Arm Holdings witnessed its shares plummet by over 17% during the session following disappointing results from its fiscal Q1 earnings report.
In contrast, Meta Platforms announced an unexpected increase in its Q2 earnings and sales, but its stock gains moderated throughout the day, ultimately up by 4.4% within a session that had seen initial increases of over 9%. Market participants are advised to keep a vigilant eye on upcoming quarterly earnings reports from major tech players, including Apple, Amazon.com, and Intel, as detailed in the D.A.
Davidson note. The CBOE Volatility Index (VIX) surged by 16% to reach 18.92 during intraday trading, signaling rising market uncertainty. Elsewhere, prices for West Texas Intermediate crude oil declined by 0.9% to $77.21 per barrel. In the precious metals market, gold saw a slight increase of 0.6%, pricing at $2,486.73 per ounce, while silver dropped by 1.6%, settling at $28.47. Among notable stock symbols mentioned in this report are $AAPL, $AMZN, $INTC, $META, $US30, and $US500..