Traders work on the floor of the New York Stock Exchange during morning trading on May 17, 2023 in New York City.
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Stocks experienced a modest slide on Thursday as investors on Wall Street analyzed remarks made by Federal Reserve Chair Jerome Powell while keeping an eye on a crucial milestone for a closely monitored bond yield.
The S&P 500 and Nasdaq Composite both dropped 0.1% and 0.2%, respectively. Meanwhile, the Dow Jones Industrial Average decreased by 16 points, or 0.1%
Powell stated that inflation remains too high and is likely to require lower economic growth. However, he also acknowledged recent data that indicated progress in curbing rising prices. Powell added that monetary policy is not yet restrictive.
According to Powell, “Incoming data over recent months show ongoing progress toward both of our dual mandate goals —maximum employment and stable prices.”
Despite the positive data, Powell emphasized, “in any case, inflation is still too high.” He explained that a few months of good data are only the beginning of building confidence in a sustainable decrease in inflation.
Market participants interpreted this as a signal that the Fed is unlikely to raise interest rates at its next policy meeting. The market is currently pricing in a 99% probability that the central bank will leave rates unchanged on Thursday, up from 93% the previous day, according to CME Group’s FedWatch tool.
Michelle Cluver, portfolio strategist at Global X, noted, “While Powell’s language kept the possibility of further rate hikes available, markets reflected an increased probability of no further rate hikes. This supportive commentary and encouraging statements about the state of the economy were balanced against the fact that the Fed remains data dependent and the potential for higher for longer yields.”
Meanwhile, the benchmark U.S. 10-year Treasury yield reached a high of 4.996% on Thursday, inching closer to the closely watched 5% level last seen in 2007. After Powell’s remarks were released, the yield remained near that high.
Traders also analyzed the latest earnings reports. According to FactSet, more than 15% of companies in the S&P 500 have already reported their earnings for this season. Of those, over 74% have exceeded expectations.
Electric vehicle giant Tesla saw its stock drop over 9% after missing analyst expectations for earnings and revenue in the third quarter. CEO Elon Musk also cautioned that the company’s Cybertruck is not expected to generate significant positive cash flow until more than a year after production begins.
Meanwhile, Netflix shares surged more than 16% following the release of third-quarter earnings that beat estimates. The company benefitted from strong ad-tier subscriptions.
In addition to technology stocks, AT&T climbed over 6% after surpassing expectations for the third quarter, while investment firm Blackstone slid 6% after reporting weaker-than-expected results.
— CNBC’s Jeff Cox and Gina Francolla contributed to this report.
Correction: LSEG is formerly known as Refinitiv. An earlier version misstated the company’s previous name.
