The major domestic equity indexes continued their slide into negative territory on Thursday as concerns over rising interest rates and the ongoing trade war, created a concerned atmosphere a day ahead of the start of the quarterly earnings season.
In its sixth consecutive day of declines, the S&P closed 2.1 percent into negative territory after shedding 3 percent in Wednesday’s session. At its session low the benchmark fell 2.7 percent to its lowest level since early July.
The Nasdaq narrowly avoided confirming a correction. During the session it fell as much as 10.3 percent from its Aug. 29 closing record high but ended the day 9.6 percent below the record.
The question is whether the equity markets will be able to recover as rising interest rates coincide with uncertainty over earnings growth in regard to the trade war with China.
After hitting an intraday high of 28.84, the CBOE Volatility Index ended the day up 2 points at 24.98, its highest close since Feb. 12.
The energy sector, pressured by a decline oil prices, was the lead, while insurers were some of the largest losers in the financial sector a day after Hurricane Michael slammed into Florida.
The S&P’s 11 major sectors all ended the day in the red with only the communications services sector managing a decline of less than 1 percent.
Energy was the biggest loser with a 3.1 percent drop as oil prices hit two-week lows after an industry report showed a bigger-than-expected build in domestic crude inventories.
The financial sector fell 2.9 percent, also hurt by a 2.7 percent drop in bank stocks a day before three of the biggest banks were to report quarterly results.
The consensus seems to be that companies making up the S&P index will report third-quarter earnings growth of 21.3 percent for the third quarter.
The technology sector, the largest loser in Wednesday’s sell-off, closed down 1.3 percent on Thursday.
Stocks had seen some support earlier in the session from data showing a smaller-than-anticipated rise in consumer prices as it helped ease fears of increasing inflation pressures.
However, investors still faced a sea of worries, including uncertainty ahead of the midterm elections on Nov. 6, and hawkish comments last week from the Fed.
Approximately 11.44 billion shares changed hands on the major domestic equity exchanges, as compared to the 7.65 billion-share average over the past 20 trading days.
Day’s Economic Data
Consumer prices rose less than expected in September, held back by a slower increase in the cost of rent and falling energy prices, as underlying inflation pressures appeared to cool slightly.
The modest price increases come despite a labor market that looks robust by most measures. A separate report on Thursday showed an unexpected but moderate rise in the number of Americans filing for unemployment benefits last week.
With the readings only slightly below what analysts expected, the inflation report is not likely to impact expectations the Federal Reserve will raise interest rates at its December policy meeting.
The Labor Department reported Thursday morning that its Consumer Price Index increased 0.1 percent last month after rising 0.2 percent in August. In the 12 months through September, the CPI increased 2.3 percent, slowing from August’s 2.7 percent advance.
Excluding the volatile food and energy components, the CPI edged up 0.1 percent for the second straight month. The core index had increased 0.2 percent in May, June and July. In the 12 months through September, the core CPI increased 2.2 percent
The Fed tracks a different inflation measure, the personal consumption expenditures (PCE) price index excluding food and energy, for monetary policy. The core PCE price index rose 2.0 percent in the 12 months through August, holding at the Fed’s 2 percent target for the fourth straight month.
Last month, gasoline prices fell 0.2 percent after rising 3.0 percent in August. Food prices were flat overall and prices for food consumed at home fell 0.1 percent.
Owners’ equivalent rent of primary residence, which is what a homeowner would pay to rent or receive from renting a home, rose 0.2 percent in September after rising 0.3 percent in August. Rental prices for primary residences rose 0.2 percent, down from a 0.4 percent increase in August.
Separately, the Labor Department said initial claims for state unemployment benefits increased 7,000 to a seasonally adjusted 214,000 for the week ended Oct. 6. While analysts had expected a slight decline, the reading remained near a 49-year low.
The four-week moving average of initial claims, considered a better measure of labor market trends as it irons out week-to-week volatility, rose 2,500 to 209,500 last week.
The labor market is viewed as being near or at full employment, which many economists believe is helping wages grow a little more quickly and fueling expectations of future rate increases.