Wall Street closed slightly lower on Thursday as tech and financial shares slumped, erasing earlier gains stemming from Fed’s most recent minutes indicating the Fed opened the debate on when to pause further interest rate hikes. All three major U.S. indexes ended the session down a fraction of a percent.
Tariff jitters continued to preoccupy Wall Street as investors eyed the upcoming G20 summit in Buenos Aires, where Trump was due to meet his Chinese counterpart Xi Jinping on Saturday to discuss trade. Trump sent mixed signals on Thursday about a potential trade deal between the world’s two largest economies, lending to a choppy session.
Technology shares weighed the most on all three major stock indexes, with the S&P 500 technology index down 0.95 percent. The interest rate-sensitive financials index was down 0.8 percent, as 10-year Treasury yields continued to fall following the release of the Fed minutes.
Among large domestic banks, JPMorgan Chase, Citigroup, Bank of America, Goldman Sachs and Morgan Stanley ended the session down between 0.8 and 1.8 percent.
Of the 11 major sectors of the S&P 500, five closed in negative territory.
Twitter fell 4.4 percent after a Politico report that Fox News boycotted the social media network seemed to fuel worries over a wider backlash. Dollar Tree rose 6.1 percent after the discount retailer said tariffs would have a minimal impact this year.
Shares of Abercrombie & Finch rose 20.9 percent after forecasting better-than-expected holiday sales.
Approximately 6.85 billion shares changed hands on the major domestic equity exchanges, as compared to the 7.67 billion share average over the past 20 trading days.
Consumer Spending Rises
Consumer spending increased by the most in seven months in October, but underlying price pressures slowed, with an inflation measure tracked by the Fed posting its smallest annual increase since February.
The strong consumer spending reported by the Commerce Department on Thursday morning will likely keep the Fed on track to raise interest rates in December, making it the fourth increase this year. But moderating inflation, if sustained, could temper expectations on the pace of rate hikes in 2019.
Fed Chair Jerome Powell appeared to indicate on Wednesday that the Fed is nearing an end to its interest-rate increases, saying its policy rate was now “just below” a level that neither brakes nor boosts a healthy economy.
Powell has faced intense criticism from President Donald Trump, who has viewed the rate hikes as undercutting the White House’s economic and trade policies.
Consumer spending, which accounts for more than two-thirds of GDP, rose 0.6 percent last month as households spent more on prescription medication and utilities, among other goods and services.
Data for September was revised down to show spending rising 0.2 percent instead of the previously reported 0.4 percent gain.
The personal consumption expenditures (PCE) price index excluding the volatile food and energy components edged up 0.1 percent after increasing 0.2 percent in September.
That lowered the year-on-year increase in the so-called core PCE price index to 1.8 percent, the smallest rise since February, from 1.9 percent in September.
The core PCE index is the Fed’s preferred inflation measure. It hit the central bank’s 2 percent inflation target in March for the first time since April 2012.
When adjusted for inflation, consumer spending advanced 0.4 percent in October, also the largest gain in seven months and pointing to a solid pace of consumption early in the fourth quarter.
Despite the strong consumer spending, there are signs that economic growth is slowing. Data this month suggested a cooling in business spending on equipment, a deterioration in the trade deficit as well as further weakness in the housing market.
A separate report on Thursday from the Labor Department showed the number of Americans filing applications for jobless benefits increased to a six-month high last week, potentially hinting at a slowdown in job growth.
Initial claims for state unemployment benefits rose 10,000 to a seasonally adjusted 234,000 for the week ended Nov. 24, the highest level since the mid-May. Claims have now risen for three straight weeks. Difficulties adjusting the data around holidays such as Thanksgiving Day, could have boosted claims.
The unemployment rate is near a 49-year low of 3.7 percent. Job gains have averaged 212,500 per month this year.
Growth estimates for the fourth quarter are currently around a 2.6 percent annualized rate. The economy grew at a 3.5 percent pace in the July-September quarter.
In October, spending on goods surged 0.5 percent after gaining 0.1 percent in September. Outlays on services shot up 0.7 percent after rising 0.3 percent the prior month.
With wages rising modestly last month, the current pace of consumer spending is unlikely to be sustainable. Still, cheaper gasoline, thanks to tumbling oil prices, is seen supporting consumption as the boost from the tax cut wanes.
Last month, personal income increased 0.5 percent, the largest gain since January, after rising 0.2 percent in September. Income growth was probably driven by the government bailing out farmers caught up in the trade war between the United States and China.
Wages rose 0.3 percent in October, matching September’s gain. Savings slipped to $967.8 billion last month, the lowest level since December 2017, from $976.9 billion in September.