As of Thursday morning, U.S. stock futures were flat. Make sure you’re prepared with these storylines investors readied themselves ahead of a key inflation report due out on Friday. Futures connected to the Dow Jones Industrial Average jumped by 38 points, which is a gain of fewer than 0.1%. Even with this small uptick, the Dow has lost 0.8% for the week thus far. After the S&P 500 showroom this week, it can be no marvel that many dealers stay fearful of a 0.9% decline. At the same time, the Nasdaq Composite fell about 1.1%.
Today’s move was the biggest shift in the bond market on record. The yield on the 10-year Treasury moved up to 4.2%, a signal of how investors are reacting to the real-time economic news around us. The Federal Reserve’s preferred inflation measure, the August personal consumption expenditures (PCE) price index, is what analysts and investors will watch most intently. This index could provide an important new check on future monetary policy overreach.
Initial jobless claims did a complete about face, coming in at 218,000, well below expectations. This drop occurred even though concerns about underlying weakness in the labor market continued to mount. Even last week’s second-quarter gross domestic product (GDP) got a solid 0.1% upward revision to 3.8%. This shift provides a brighter context for promising economic development.
Given this roller coaster that is the market today, a few big name tech titans have certainly turned heads and come under fire. Corporate titans like Oracle, Meta, and the self-driving company Tesla have been hailed for their dramatic advancements in artificial intelligence. While their stock performance has largely been out of their hands, getting swept up by much bigger market headwinds. Andrew Slimmon is head of the Applied Equity Advisors team at Morgan Stanley Investment Management. He cautioned that the tech sector is uniquely vulnerable to this type of market correction.
“The market was vulnerable to a pullback and because tech has been a leader, it’s the most vulnerable.” – Andrew Slimmon
Tom Lee, the head of research at crypto intelligence company Fundstrat, has a sunnier disposition. He still sees a possibility of one more rate cut this year. He warned against the idea that such a step would be bad news.
“We know that the Fed was lagging in its easing because of that imputed shelter inflation, but the reality is they should have been easing sooner … and so I think that we have to be careful.” – Tom Lee
Slimmon used a more moderated tone on recent market advances too, noting that market pullbacks aren’t all bad.
“I would not panic on this action. Any pullback or worse for the euphoria stocks is healthy for the market. I don’t think it’s a good long-term sign when speculation gets rampant.” – Andrew Slimmon
In fact, markets are hungrily focusing on the chances of additional rate cuts. After a steady stream of positive economic indicators, analysts expect that any continuing positive surprises will make a major impact on investor sentiment. With two rate cuts already priced into expectations for this year, all eyes among stakeholders will be focused on the inflation data to be released next week.