U.S. Stocks Move Sharply Lower On Worries About Interest Rates, Economic Outlook

wallstreet oct17 15dec22 lt

Stocks have moved sharply lower in morning trading on Thursday, extending the pullback seen over the course of the previous session. With the steep drop on the day, the major averages have fallen to their lowest intraday levels in a month.

Currently, the major averages are off their lows of the session but still firmly negative. The Dow is down 616.53 points or 1.8 percent at 33,349.82, the Nasdaq is down 255.76 points or 2.3 percent at 10,915.12 and the S&P 500 is down 77.24 points or 1.9 percent at 3,918.08.

Concerns about the outlook for interest rates continue to weigh on Wall Street after the Federal Reserve's monetary policy announcement on Wednesday was deemed more hawkish than expected.

While the Fed raised interest rates by 50 basis points as widely expected, the accompanying statement and the central bank's latest projections led to worries about where rates will peak.

A batch of disappointing U.S. economic data has also added to concerns the Fed's aggressive interest rate hikes will push the economy into a recession.

Before the start of trading, the Commerce Department released a report showing retail sales pulled back by more than expected in the month of November.

The Commerce Department said retail sales slid by 0.6 percent in November after surging by 1.3 percent in October. Economists had expected retail sales to edge down by 0.1 percent.

Excluding a steep drop in sale by motor vehicle and parts dealers, retail sales slipped by 0.2 percent in November after jumping by 1.2 percent in October. Ex-auto sales were expected to inch up by 0.2 percent.

A separate report released by the Federal Reserve unexpectedly showed a modest decrease in U.S. industrial production in the month of November.

The Fed said industrial production slipped by 0.2 percent in November after edging down by 0.1 percent in October. Economists had expected industrial production to inch up by 0.1 percent.

The unexpected dip in industrial production came as manufacturing output fell by 0.6 percent and mining output slid by 0.7 percent.

Meanwhile, a 3.6 percent spike in utilities output helped limit the downside amid unseasonably cold weather across much of the country.

Separate reports from the New York and Philadelphia Federal Reserves also showed contractions in regional manufacturing activity in the month of December.

"The 0.6% m/m falls in retail sales and manufacturing output in November suggest that the economy has lost some serious momentum, with the resilience of consumers to much higher interest rates starting to crumble," said Andrew Hunter, Senior U.S. Economist at Capital Economics.

He added, "Solid gains in previous months mean real consumption growth should still be strong in the fourth quarter as a whole, but we expect the economy to slip into a mild recession in the first half of next year as the Fed's relentless hawkishness takes its toll."

Computer hardware stocks have moved sharply lower in morning trading, dragging the NYSE Arca Computer Hardware Index down by 3.2 percent to its lowest intraday level in a month.

Western Digital (WDC) has helped lead the sector lower after Goldman Sachs downgraded its rating on the data storage company stock to Sell from Neutral.

Substantial weakness has also emerged among semiconductor stocks, as reflected by the 3.1 percent nosedive by the Philadelphia Semiconductor Index.

Gold stocks have also shown a significant move to the downside, resulting in a 2.7 percent plunge by the NYSE Arca Gold Bugs Index.

The sell-off by gold stocks comes amid a steep drop by the price of the precious metal, with gold for February delivery tumbling $31.20 to $1,787.50 an ounce.

Tobacco, software and brokerage stocks are also seeing considerable weakness on the day, moving lower along with most of the other major sectors.

In overseas trading, stock markets across the Asia-Pacific region moved mostly lower during trading on Thursday. Japan's Nikkei 225 Index fell by 0.4 percent, while Hong Kong's Hang Seng Index slumped by 1.6 percent.

The major European markets have also moved to the downside on the day. While the U.K.'s FTSE 100 Index has slid by 0.8 percent, the French CAC 40 Index and the German DAX Index are both down by 2.7 percent.

In the bond market, treasuries have moved higher over the course of the morning. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, is down by 3.5 basis points at 3.468 percent.

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