First published 4:39AM EST
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The U.S. stock market is down on Thursday after enjoying a brief rally on Wednesday on news of the Bank of England’s (BOE) intervention. Stock indices finished Thursday’s trading session in the red. The Dow Jones Industrial Average (DJIA), the S&P 500 (SPX), and the Nasdaq 100 (NDX) decreased 1.54%, 2.11%, and 2.86%, respectively.
The utilities sector was the session’s laggard, as it declined by 4.02%. Conversely, the energy sector was the session’s leader, with a loss of 0.01%.
The jobless claims report indicated that initial claims came in at 193,000, better than the forecast of 215,000. GDP revisions report indicated the U.S. economy continued to contract in the first half of this year by 0.6%.
WTI Crude oil also fell by 0.78%, with WTI Crude closing at $81.51.
Furthermore, the U.S. 10-Year Treasury yield increased slightly to 3.77%, along with the Two-Year yield, as it hovers around 4.18%. This brings the spread between them to -41 basis points. The negative spread indicates that investors still have fears of a recession.
Compared to yesterday, the market is pricing in a higher chance of a higher Fed Funds rate for the end of the year. In fact, the market’s expectations for a rate in the range of 4% to 4.25% decreased to 40.2%, which is down from yesterday’s expectations of 45.8%. In addition, the market is now also assigning a 59.6% probability to a range of 4.25% to 4.5%. For reference, investors had assigned a 46.1% chance yesterday.
Major News of the Day
The earnings season is upon us and retailer Bed Bath and Beyond’s Q2 results left the Street disappointed. Other companies whose earnings left analysts dismayed included CarMax, a retailer of used automobiles, and Rite Aid.
In other news, NIO opened its first German battery swap unit while Taiwan Semiconductor’s plans of increasing its chip prices were rejected by Apple.
The BOE Pivot and How it Affected the U.S. Markets
In a surprise intervention, the Bank of England decided to buy large amounts of debt to stabilize the crashing stock market and currency. The move was a sharp contrast to the monetary tightening policies that are being pursued by central banks across the world. The unexpected pivot by the Bank of England gave emotional investors in the U.S. a flicker of hope, and stocks rallied, snapping the Dow and S&P 500 indexes out of a six-day losing streak.
The S&P 500, the Dow, and the Nasdaq 100 shot up 1.97%, 1.88%, and 1.97%, respectively at the end of the regular trading hours of Wednesday.
Alternatively, bond prices rose after the BOE news, pushing down bond yields, and thereby uplifting the stock market further. The benchmark 10-year Treasury yield plunged after briefly crossing 4%.
Yuan Weakens, U.S. Exports May be Impacted
Among the major global economic updates, the dip in the yuan is worthy of mentioning. The Chinese currency slipped to its weakest against the dollar in over 14 years. While this does not have a direct significant impact on the U.S. stock market, it may be noted that U.S. exports to China will become more expensive, thus reducing demand for U.S. goods from China.
