Dow Gives Back Ground After Yesterday's Rally, Nasdaq, S&P 500 Close Little Changed

wallstreet oct03 01dec22 lt

After skyrocketing over the course of Wednesday's session, stocks turned in a relatively lackluster performance during trading on Thursday.

The Nasdaq and the S&P 500 spent the day bouncing back and forth across the unchanged line, while the narrower Dow gave back ground.

The major averages eventually ended the session mixed. While the Nasdaq crept up 14.45 points or 0.1 percent to 11,482.45, the Dow slid 194.76 points or 0.6 percent to 34,395.01 and the S&P 500 edged down 3.54 points or 0.1 percent to 4,076.57.

The pullback by the Dow came after the blue chip index ended Wednesday's trading at its best closing level in over seven months.

A steep drop by Salesforce (CRM) weighed on the Dow, with the business software company plunging by 8.3 percent after announcing Bret Taylor will step down as Vice Chair and Co-CEO, effective January 31, 2023.

The lack of direction shown by the broader markets came as traders looked ahead to the Labor Department's closely watched monthly jobs report on Friday.

Economists currently expect employment to jump by 200,000 jobs in November after shooting up by 261,000 jobs in October, while the unemployment rate is expected to hold at 3.7 percent.

The data could affect the outlook for interest rates, although the impact may be somewhat muted following Federal Reserve Chair Jerome Powell's remarks on Wednesday hinting at a slowdown in the pace of rate hikes as soon as next month.

Traders were also digesting another slew of U.S. economic data, including a report from the Institute for Supply Management showing manufacturing activity contracted for the first time in over two years in the month of November.

The ISM said its manufacturing PMI slipped to 49.0 in November from 50.2 in October, with a reading below 50 indicating a contraction. Economists had expected the index to edge down to 49.8.

With the slightly bigger than expected decrease, the manufacturing PMI fell to its lowest level since hitting 43.5 in May of 2020.

Meanwhile, a separate report released by the Labor Department showed first-time claims for U.S. unemployment benefits pulled back by more than expected in the week ended November 26th.

The report said initial jobless claims fell to 225,000, a decrease of 16,000 from the previous week's revised level of 241,000.

Economists had expected jobless claims to edge down to 235,000 from the 240,000 originally reported for the previous week.

The Commerce Department also released a report showing personal income climbed by 0.7 percent in October after rising by 0.4 percent in September. Economists had expected another 0.4 percent increase.

The report said personal spending also advanced by 0.8 percent in October after climbing by 0.6 percent in September. The increase matched economist estimates.

A reading on inflation said to be preferred by the Fed showed core consumer prices, which exclude food and energy prices, edged up by 0.2 percent in October after climbing by 0.5 percent in September. Economists had expected prices to rise by 0.3 percent.

The annual rate of core consumer price growth also slowed to 5.0 percent in October from 5.2 percent in September, coming in line with estimates.

Sector News

Most of the major sectors showed only modest moves on the day, contributing to the lackluster performance by the broader markets.

Gold stocks showed a substantial move to the upside, however, driving the NYSE Arca Gold Bugs Index up by 3.6 percent to its best closing level in over five months.

The rally by gold stocks came amid a sharp increase by the price of the precious metal, with gold for February delivery soaring $55.30 to $1,815.20 an ounce.

Meanwhile, natural gas stocks saw considerable weakness on the day, dragging the NYSE Arca Natural Gas Index down by 1.8 percent.

The weakness in the sector came as the price of natural gas for January delivery slumped $0.192 or $6.738 per million BTUs.

Significant weakness was also visible among banking stocks, as reflected by the 1.3 percent loss posted by the KBW Bank Index.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region moved mostly higher during trading on Thursday. Japan's Nikkei 225 Index advanced by 0.9 percent, while China's Shanghai Composite Index rose by 0.5 percent.

Meanwhile, the major European turned in a mixed performance on the day. While the U.K.'s FTSE 100 Index edged down by 0.2 percent, the French CAC 40 Index crept up by 0.2 percent and the German DAX Index climbed by 0.7 percent.

In the bond market, treasuries moved sharply higher, extending the rally seen late in the previous session. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, plunged 17.4 basis points to a two-month closing low of 3.529 percent.

Looking Ahead

Trading on Friday is likely to be impacted by reaction to the Labor Department's closely watched monthly employment report for November.

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