Topline
Stocks plunged on Thursday as recession fears continued to weigh on markets and investors nervously looked ahead to a closely-watched consumer price index reading due Friday, with ongoing concern that inflation could come in higher than expected.
Key Facts
Stocks fell for a second day in a row: The Dow Jones Industrial Average lost 1.9%, over 600 points, while the S&P 500 dropped 2.4% and the tech-heavy Nasdaq Composite 2.7%.
Markets began to move lower early in the day after weekly jobless claims hit 229,000—the highest level since January, though continuing claims were unchanged at 1.3 million, signaling that companies are still hiring despite recession fears.
Investor sentiment also took a hit from ongoing concerns about Friday’s consumer price index report, amid expectations that inflation will grow 8.4% from a year ago (compared to 8.3% in April and 8.5% in March).
Stocks are tanking thanks to “growing nervousness that tomorrow’s CPI data will clearly show inflation isn’t near peaking,” says Oanda senior market analyst Edward Moya, who adds, “warning signs about the economy are emerging as weekly jobless claims are starting to rise.”
Casino stocks and tech stocks were among the market’s biggest decliners on Thursday: Shares of Las Vegas Sands fell over 5%, while tech giants Meta and Amazon dropped 6% and 4%, respectively.
Shares of electric-vehicle maker Tesla, meanwhile, fell 1% despite analysts at UBS upgrading the stock to a “buy” rating and predicting upside of more than 50% thanks to the company’s long-term growth prospects.
Tangent:
“While the rise in initial claims looks meaningful, it is not necessarily a sign of recession,” says Bill Adams, chief economist for Comerica Bank. “During the previous expansion, the four-week moving average of initial claims, which measures the trend, rose from trend by the same amount in 2019, 2017, and 2013,” he says, predicting “continued economic expansion, albeit at a slower pace than in 2021.”
Key Background:
After hitting a low point last month, stocks rebounded slightly but have been trading sideways in recent weeks. Markets finished slightly lower last week and are down again this week, which would be the Dow’s tenth losing week out of eleven. The S&P 500 and Nasdaq, meanwhile, are on track for their ninth negative week out of ten. Stocks continue to get hit by ongoing investor concerns about high inflation leading to a possible recession, with the Federal Reserve on track to raise interest rates by 0.50% at its upcoming policy meeting this month.
What To Watch For:
“Inflation concerns have caused extremely negative sentiment readings, and it’s hard to imagine these readings getting too much worse as there’s a floor in terms of how low they can go,” according to Bespoke Investment Group. “Therefore, barring a significant negative shift in the economy, this would suggest a higher likelihood of positive surprises (lower rate of inflation) than downside surprises at this point, and any cooling on the inflation front should result in a bounce-back for sentiment (and potentially the stock market).”
Further Reading:
Dow Falls Nearly 300 Points, Treasury Yields Surge As Experts Warn Of A Hard Economic Landing (Forbes)
Tesla Stock Can Jump Another 50% Thanks To ‘Superior’ Growth In The Years Ahead, Analysts Say (Forbes)
The Economy May Be Slowing, But Recession Fears Are ‘Overblown’ These Experts Argue (Forbes)
Exxon Mobil Shares Hit All-Time High As Oil And Gas Prices Keep Surging With No End In Sight (Forbes)