Stocks drifted to a mixed finish Thursday as Wall Street’s momentum slowed following its hot first half of November.
The S&P 500 edged up by 5.36 points, or 0.1%, to 4,508.24 and remains comfortably on track for its third straight winning week. The Dow Jones Industrial Average slipped 45.74, or 0.1%, to 34,945.47, and the Nasdaq composite gained 9.84, or 0.1%, to 14,113.67.
Walmart weighed on the market with an 8.1% drop after it warned that shoppers began pulling back on spending late last month. The nation’s largest retailer also gave a forecast for upcoming holiday profit that was weaker than analysts expected, despite topping forecasts for results in its latest quarter.
Stocks in the oil-and-gas industry were particularly weak after the price of crude tumbled sharply to its lowest since July. Marathon Petroleum dropped 3.5%, and Halliburton fell 3.3%.
Investors are betting inflation is cooling enough to convince the Federal Reserve to halt its hikes to interest rates following its fusillade since last year. That in turn has pushed expectations up for when the Fed could begin cutting rates, which can act like steroids for financial markets.
Several more reports on Thursday indicated a slowing economy. While the weaker-than-expected data are of course a signal the economy may be losing some of its strong momentum, for investors, they just as importantly may be showing that upward pressures on inflation is easing.
One report said that slightly more workers applied for unemployment benefits last week. The number is still low relative to history, but a softening in the job market could prevent the too-strong raises in workers’ pay that the Fed fears could trigger a vicious cycle keeping inflation high.
Separate reports said that manufacturing in the mid-Atlantic region is unexpectedly weakening, while U.S. industrial production weakened more than expected in October.
The Fed has been trying to shepherd the economy along a tightrope, to slow just enough to stamp out high inflation without falling into a recession. Thursday’s weaker-than-expected reports strengthened investors’ hopes that the Fed can pull it off and go easier on interest rates. That triggered an immediate drop in Treasury yields.
The yield on the 10-year Treasury fell to 4.44% from 4.54% late Wednesday. Just last month, it was above 5% at its highest level since 2007 and raising worries on Wall Street as it undercut prices for stocks and other investments.
Lower yields offer more breathing space for financial markets, and 45% of the stocks in the S&P 500 rose.
Macy’s jumped 5.7% after delivering a surprising profit for the latest quarter. Sonos leaped 17.1% on speculation that it may start selling headphones in the second half of its fiscal year, which could be a meaningful new business.
Some economists and analysts are warning that investors have become overzealous in predicting when the Fed could begin cutting rates. Even if the Fed is done hiking its main interest rate, officials at the central bank have said they’ll likely keep it high for a while to ensure inflation is truly stamped out. The federal funds rate is above 5.25% and at its highest level since 2001.
A slowing economy would also mean softer growth in demand for fuel, and worries are already high about swelling inventories for crude oil. That sent crude oil prices skidding sharply.
A barrel of benchmark U.S. crude for delivery in December tumbled $3.76 to settle at $72.90. Brent crude, the international standard, also dropped $3.76, to $77.42 per barrel.
Strategists at Barclays expect global economic growth to slow in 2024 before recovering in 2025, as inflation falls further.
That’s still a “benign bottom for a business cycle,” Ajay Rajadhyaksha and other analysts wrote in a report, and they expect the U.S. unemployment rate to top out at 4.3%, well below where it has in past recessions.
In stock markets abroad, Tokyo’s Nikkei 225 slipped 0.3% after Japan reported that its exports rose a meager 1.6% in October, down from September’s growth.
Indexes were mixed across the rest of Asia and Europe.
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AP Business Writers Matt Ott and Elaine Kurtenbach contributed.
