U.S. stocks pulled back on Thursday as investors reacted to the ongoing inversion in the Treasury yield curve, along with a host of economic data and a tentative deal to avoid a nationwide railway strike.
What’s happening
- The Dow Jones Industrial Average DJIA, -0.39% was off 43 points, or 0.1%, to 31,100.
- The S&P 500 SPX, -1.00% fell 25 points, or 0.7%, to 3,920.
- The Nasdaq Composite COMP, -1.51% declined 115 points , or 1%, to 11,601.
On Wednesday, the Dow Jones Industrial Average rose 30 points, or 0.1%, to 31135, the S&P 500 increased 13 points, or 0.34%, to 3946, and the Nasdaq Composite gained 86 points, or 0.74%, to 11720.
What’s driving markets
The White House announced that a deal to avert a railway strike set for midnight was reached. The stocks of railroad operators including Union Pacific UNP, +1.80%Corp. , and Canadian Pacific Railway Limited CP, -0.51% rose in response, helping to lift the Dow Transportation Average DJT, -0.02%, which was up 0.1% in recent trade.
Wall Street had fretted such a strike could exacerbate inflation at a time when consumer prices already were rising at a clip of 8.3% year-over-year in August.
In U.S. data Thursday retail sales rose 0.3% in August as Americans spent more on new cars and trucks and went out to eat more, suggesting the economy grew at at a steady pace toward the end of the summer.
Meanwhile new jobless benefit claims fell by 5,000 to 213,000 in the week ended Sept. 10, the Labor Department said, suggesting the labor market remains healthy.
However, two regional gauges of manufacturing sentiment moved into slight contraction territory in September, according to data released Thursday.
In addition to the economic data and railway news, Art Hogan, chief market strategist at B. Riley Financial, said investors were also closely scrutinizing the ongoing inversion of the 2s/10s yield curve, as the 2-year yield briefly traded more than 40 basis points above the 10-year yield.
“There are three inputs driving markets today and the largest of them is people being hyper-focused on the yield curve, especially the two year, which remains stubbornly high,” Hogan said.
“This is a reflect of our interpretation of what monetary policy will be in the short term.”
In recent trade, the 2-year yield BX:TMUBMUSD02Ywas up 6.4 basis points to 3.835%, while the 10-year yield BX:TMUBMUSD10Yis up 2.9 basis points to 3.444%.
As the weekend approaches, market participants are looking ahead to next week’s two-day Federal Reserve policy meeting, where the central bank is largely expected to hike its benchmark interest rate by 75 basis points, although Fed funds futures traders are pricing in increasing odds of a 100 basis-point hike, which Nomura has now said is its base case. Hogan said expectations around next week’s meeting could be keeping a lid on stocks as investors are reluctant to open new long positions.
Stocks in focus
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