S&P, Dow, Nasdaq drift lower after Fed pause and more economic data

Scott Olson

Major market averages opened in the red on Thursday as investors still digest the first pause in rate hikes in 15 months combined with a more hawkish dot plot.

The Nasdaq Composite (COMP.IND) lost 0.4%, the S&P 500 (SP500) handed back 0.2%, and the Dow(DJI) hovered near even.

The S&P notched a slight gain on Wednesday after the usual post-Fed indecisiveness, but it was enough to make it five-straight up days for the first time since November 2021, Deutsche Bank noted.

“The press conference presumably did intend to sound hawkish, and presumably did not intend to sound economically incoherent,” UBS’ Paul Donovan said. “The fabled ‘dot plots’ signaled two rate hikes—given how these are prepared, they are unlikely to be a coordinated Fed message.”

“Powell said pausing allowed the Fed to get more information before making decisions. At a time when data is less reliable, pausing to reflect should be a way of life for policy makers, not a revelation at the eleventh hour. Tight labor markets were emphasized, which makes modest unit labor costs and weak real wage growth awkward to explain.”

Rates are lower The 10-year Treasury yield (US10Y) slid 6 basis points to 3.73% and the 2-year yield (US2Y) lost 5 basis points 4.65%.

There was a plethora of economic indicators this morning.

Weekly initial jobless claims arrived at 262K, higher than the anticipated 250K figure economists expected. Claims are still a very important number for investors to watch in terms of FOMC action, Chaim Siegel, leader of the Fed Trader Investing Group, said in the podcast breakdown of the Fed meeting.

May retail sales figures came in on solid ground +0.3% M/M compared to the forecasted -0.1% level.

The Philly Fed business outlook came in at -13.7 in June versus the consensus -13.5 number.

Import, export prices, declined in May. May import prices slipped 0.6%, compared with -0.6% consensus and +0.3% in April number. Export prices declined 1.9%against the 0.0% expected level and -0.1% prior reading.