U.S. indices finished in the red once again as the Dow Jones Industrial Average (DJIA) closed down 0.56%, while the S&P 500 (SPX) dropped 1.13% on Thursday. Meanwhile, the Nasdaq 100 (NDX) fell 1.71%.
The major averages had closed the regular trading session of Wednesday with moderate gains after a rough session. The S&P 500, the Dow, and the Nasdaq 100 closed 0.34%, 0.1%, and 0.84% higher, respectively.
The energy sector was the session’s laggard today, as it fell by 2.59%. Conversely, the healthcare sector was the session’s leader, with a gain of 0.54%. In addition, WTI crude oil lost 4.3%, reaching $85.14 per barrel.
Furthermore, the U.S. 10-Year Treasury yield increased to 3.45%, an increase of more than four basis points. Similarly, the Two-Year Treasury yield also increased, as it hovers around 3.86%. This brings the spread between them to -41 basis points. The negative spread indicates that investors still have fears of a recession.
Economic Data
The unemployment claims report indicated that initial unemployment claims reduced for a fifth straight week to 213,000 from 218,000. The retail sales report indicated that advance estimates of U.S. retail and food services sales for the month of August were up 0.3%, month-over-month, after seasonal adjustments.
The Philadelphia Fed Manufacturing Index in the United States dropped into negative territory of -9.9 in the month of September from a positive 6.2 in August, missing market expectations.
The August CPI reading was disappointing, showing that prices had risen 0.1% month-over-month as against the expectation of a decline of the same magnitude. The 5% decline in gas prices did little to bring the inflation down in August.
However, the August PPI revealed that wholesale prices dropped 0.1% from July. This gave Wall Street one less reason to worry about.
GDPNow Tool Points to Minimal GDP Growth for Q3
The Atlanta Federal Reserve updated its GDPNow reading, which allows it to estimate GDP growth in real-time. Currently, it estimates that the economy will see an annualized expansion of 0.52% in the third quarter after experiencing two consecutive quarters of decline.
This is down from the previous reading of 1.3%. The “nowcast” becomes more accurate as more economic data is released throughout the quarter. Therefore, it will be interesting to see how the estimate changes, going forward. In the previous quarter, the estimate started off positive and eventually ended up correctly estimating a GDP decline by the end of Q2.
Because of this, investors should invest carefully, as we are not in the clear just yet.
Fears of Impending Rail Strike Continue to Haunt
A looming national rail strike that could have put supply chains in the U.S. under major pressure was averted last night as major railroad unions in the United States achieved a tentative deal with the U.S. Government.
Meanwhile, freight capacity in airplanes, trucks, and barges is already tight and incapable of accommodating large portions of the huge volumes of goods that are transported by rail. Notably, rail carries 30% of America’s freight, and experts are of the opinion that a strike could cost the economy $2 billion per day.
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