US stocks fell Wednesday as Wall Street continued to analyze corporate financial updates for signs of an “earnings slump” many analysts have warned.
Investors also appreciated the government’s monthly retail sales report. This reflects slower consumer spending activity and lower-than-expected inflation.
The S&P 500 (^GSPC) is down 0.4% and the Dow Jones Industrial Average (^DJI) is down 250 points (0.7%). The technology-focused Nasdaq Composite (^IXIC) fell 0.2%.
St. Louis Fed President James Bullard said Wednesday that interest rates should be raised above 5% “as soon as possible” to keep inflation in check before pausing the current rate hike cycle.
“Would you like to go where we should go?” he said at a Wall Street Journal event. “Why are you slowing down?”
Meanwhile, Federal Reserve Chairman Jerome Powell has tested positive for COVID-19 and is experiencing mild symptoms.
“Chairman Powell is up to date on COVID-19 vaccines and boosters,” the Fed said in a statement. “He is working remotely while isolating at his home, per guidance from the Centers for Disease Control and Prevention.”
On the economic data side, the Department of Commerce on Wednesday announced that US retail sales fell 1.1% last month, although the November figures were also revised downwards. Economists had expected a 0.8% drop in December.
Meanwhile, the producer price index (PPI), which measures inflation at the wholesale level, fell 0.5% last month, its biggest drop since the pandemic. Headline PPI rose at a 6.2% clip for the year, down significantly from 7.3% y/y in November. The print shows that the consumer price index (CPI) has fallen 6.5% after a week since it showed easing inflation.
In corporate news, Microsoft (MSFT) announced Wednesday that it will lay off 10,000 employees as part of cost-cutting measures. The impact of headcount reductions is about 4.5% Among the company’s 221,000 employees, Microsoft’s stock fell more than 1% in afternoon trading.
United Airlines (UAL) shares lost momentum after gaining early in the session on better-than-expected earnings in the final three months of 2022 and a brighter outlook for the new year. rice field.
International Business Machines Corporation (IBM) shares fell nearly 2% after being downgraded from overweight to equal weight by Morgan Stanley.
Moderna (MRNA) shares rose nearly 4% after the biotech company said late-stage clinical trial results for a vaccine against RSV were effective and it would seek approval for a shot from the Food and Drug Administration by the middle of this year. Did.
Investors are approaching what is likely to be a difficult fourth quarter earnings season. Analysts have lowered earnings growth forecasts. Data from FactSet Research shows that the S&P 500 is expected to see a 3.9% year-over-year decline in fourth quarter earnings. If this happens, it will be the first year-over-year decline in earnings reported by the index since late 2020. .
DataTrek’s Nicholas Colas said the short-term decline in the S&P’s earnings streak is similar to the one that preceded the last four recessions, but there is not enough evidence at this time to support a recession or a significant decline in corporate earnings. I point out that it is not.
“What we don’t yet have is visibility into the catalyst that will drive the next series of larger negative quarterly comparisons,” Corus said.
“Yes, last year’s aggressive Fed monetary policy could still hurt the U.S. economy and hurt corporate earnings in 2023,” he added. We don’t have enough economic data points to definitively explain the recession or the significant drop in corporate earnings.”
Investors also saw key central banks move overseas early on Wednesday. Contrary to market expectations, the Bank of Japan maintained ultra-low interest rates and capped bond yields and did not change monetary policy. The yen weakened against the dollar as a result.
In commodity markets, crude oil continued to rise. West Texas Intermediate (WTI) Crude Oil futures rose 2% to $81.80 a barrel.
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Alexandra Semenova is a reporter at Yahoo Finance. follow her on her twitter @alexandraandnyc
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