Overview:
The U.S. stock market saw a modest decline on Thursday, October 10, 2024, as investors weighed mixed economic signals. The Consumer Price Index (CPI) came in slightly higher than expected, rising by 0.2% on a monthly basis and 2.4% annually, indicating that inflationary pressures remain. At the same time, jobless claims increased to 258,000, surpassing the forecasted 230,000. This combination of rising inflation and higher unemployment created uncertainty about the Federal Reserve’s next move on interest rates. Investors are now focused on the potential for a 25-basis point rate cut, with markets pricing in an 80% probability for such an action in the upcoming Federal Reserve meeting.
Fear & Greed Index:
Neutral – Investors are balancing concerns over higher inflation with a weaker labor market, leading to uncertainty about the near-term direction of the market.
Key Indices (Closed Prices):
- Dow Jones Industrial Average: -0.14% at 42,454.12
- S&P 500: -0.21% at 5,780.05
- Nasdaq Composite: -0.05% at 18,282.05
Despite recent record highs for both the S&P 500 and Dow Jones, the market gave back some gains as inflation data fueled concerns about the Federal Reserve’s rate decision. Investors are also closely watching third-quarter earnings reports, which will begin with major banks on Friday.
Sector Performance:
Of the S&P 500’s 11 major sectors, only three posted gains on Thursday. The energy sector led the way with a 0.8% increase, driven by rising oil prices due to a combination of increased demand ahead of Hurricane Milton and concerns over Middle Eastern conflicts affecting supply.
- Winners:
- Energy: +0.8%, supported by higher oil prices as U.S. fuel demand spiked and fears of supply disruption grew due to the hurricane and geopolitical risks.
- Losers:
- Airlines: Delta Airlines fell 1% after the company issued a quarterly revenue forecast below expectations, citing a potential slowdown in travel demand. This downturn spread to other airlines, with American Airlines closing 1.4% lower.
- Pharmaceuticals: Pfizer shares declined 2.8% as the company faced internal pressure from activist investor Starboard, leading to tensions within the firm.
Key Movers:
- Delta Airlines (DAL): The airline’s stock dropped 1% after issuing a weaker-than-expected revenue outlook, hinting at slowing travel demand for the upcoming quarter.
- Pfizer (PFE): Shares of Pfizer fell 2.8% following leadership challenges and distancing by former executives, as activist investor Starboard continues to push for changes within the company.
- American Airlines (AAL): Fell 1.4%, dragged down by overall weakness in the airline sector.
Economic Data:
Economic data played a key role in driving market sentiment:
- CPI: The Consumer Price Index for September showed a 0.2% monthly increase and a 2.4% year-over-year rise. Core CPI, which excludes food and energy, rose by 3.3%, slightly above the 3.2% forecast, reflecting persistent inflationary pressure.
- Jobless Claims: Jobless claims for the week ending October 5 climbed to 258,000, significantly higher than the anticipated 230,000, signaling potential softening in the labor market.
Outlook:
Investors are now looking ahead to Friday’s third-quarter earnings season, starting with key reports from major banks. These earnings will offer a clearer picture of corporate performance and provide insight into how companies are managing in a high-inflation, high-interest-rate environment. Additionally, market participants are keeping a close eye on the Federal Reserve’s upcoming meeting, with a rate cut seen as highly probable due to the mixed economic data. Geopolitical tensions, particularly in the Middle East, will continue to support oil prices, keeping energy stocks in focus for the near term.
While the market remains cautious, particularly with inflation still running above expectations, the potential for rate cuts provides some optimism for investors looking for relief from tightening monetary policy. The upcoming earnings reports are expected to be a key driver of market sentiment in the coming weeks.