After ending Wednesday’s session sharply lower, stocks saw significant volatility over the course of the trading day on Thursday. The major averages swung back and forth across the unchanged line before ending the day firmly in the red.
The major averages fell to new lows going into the close of trading. The Dow fell 250.91 points or 0.8 percent to 33,414.17, the Nasdaq slumped 128.13 points or 1.0 percent to 13,186.18 and the S&P 500 slid 36.60 points or 0.9 percent to 4,278.00.
The volatility on Wall Street came as Federal Reserve Chair Jerome Powell delivered highly anticipated remarks at an Economic Club of New York luncheon.
Powell argued in prepared remarks that inflation is “still too high” and warned additional monetary policy tightening may be needed.
Powell noted that shorter-term measures of core inflation over the most recent three and six months are now running below 3 percent but cautioned these shorter-term measures are often volatile.
“In any case, inflation is still too high, and a few months of good data are only the beginning of what it will take to build confidence that inflation is moving down sustainably toward our goal,” Powell said. “We cannot yet know how long these lower readings will persist, or where inflation will settle over coming quarters.”
He added, “While the path is likely to be bumpy and take some time, my colleagues and I are united in our commitment to bringing inflation down sustainably to 2 percent.”
Powell described the current stance of monetary policy as “restrictive” and reiterated Fed officials are willing to keeping policy restrictive until they are confident inflation is on a downward path.
Citing recent data showing the resilience of economic growth and demand for labor, Powell also warned additional monetary policy tightening could be needed.
“Additional evidence of persistently above-trend growth, or that tightness in the labor market is no longer easing, could put further progress on inflation at risk and could warrant further tightening of monetary policy,” he said.
Powell also addressed tightening financial conditions amid a recent increase in longer-term bond yields and said the Fed remains attentive to these developments, because persistent changes in financial conditions can have implications for the path of monetary policy.
Treasury yields moved higher following Powell’s remarks, extending the upward trend seen over the past few sessions and once again reaching sixteen-year highs.
The increase in yields also came as the Labor Department released a report showing initial jobless claims unexpectedly declined to a nearly nine-month low in the week ended October 14th.
The report said initial jobless claims fell to 198,000, a decrease of 13,000 from the previous week’s revised level of 211,000.
Economists had expected jobless claims to inch up to 212,000 from the 209,000 originally reported for the previous week.
With the unexpected dip, jobless claims dropped to their lowest level since hitting 194,000 in the week ended January 21st.
Sector News
Interest rate-sensitive commercial real estate stocks saw substantial weakness on the day, dragging the Dow Jones U.S. Real Estate Index down by 2.4 percent.
Considerable weakness also emerged among computer hardware stocks, as reflected by the 2.0 percent slump by the NYSE Arca Computer Hardware Index.
Pharmaceutical stocks also showed a significant move to the downside, with the NYSE Arca Pharmaceutical Index falling by 1.7 percent.
Networking, telecom and housing stocks also came under pressure over the course of the session, moving lower along with most of the other major sectors.
Other Markets
In overseas trading, stock markets across the Asia-Pacific region moved mostly lower during trading on Thursday. Japan’s Nikkei 225 Index tumbled by 1.9 percent, while Hong Kong’s Hang Seng Index plunged by 2.5 percent.
The major European markets also moved to the downside on the day. While the U.K.’s FTSE 100 Index slumped by 1.2 percent, the French CAC 40 Index slid by 0.6 percent and the German DAX Index fell by 0.3 percent.
In the bond market, treasuries moved lower over the course of the session, extending a recent downward trend. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, climbed 8.4 basis points to 4.988 percent.
Looking Ahead
Amid a quiet day on the U.S. economic front, trading on Friday may be impacted by reaction to the latest earnings news, with American Express (AXP) among the companies due to report their quarterly results before the start of trading.
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