U.S. Stocks Tumble To Five-Month Lows Following Strong Economic Data

Stocks moved notably lower over the course of the trading day on Thursday, extending the sharp pullback seen during Wednesday’s session. With the continued weakness, the major averages fell to their lowest closing levels in five months.

The major averages staged a recovery attempt in the latter part of the session but moved back to the downside going into the close. The Nasdaq tumbled 225.62 points or 1.8 percent to 12,595.61, the S&P 500 climbed 49.54 points or 1.2 percent to 4,137.23 and the Dow slid 251.63 points or 0.8 percent to 32,784.30.

A negative reaction to quarterly results from Meta Platforms (META) weigh on the Nasdaq, with the Facebook parent plunging by 3.7 percent despite reporting third quarter results that exceeded analyst estimates on the top and bottom lines.

The weakness on Wall Street also came following the release of a slew of largely upbeat U.S. economic data, including a Commerce Department report showing GDP soared by more than expected in the third quarter of 2023.

The Commerce Department said GDP spiked by 4.9 percent in the third quarter after jumping by 2.1 percent in the second quarter. Economists had expected GDP to surge by 4.2 percent.

The stronger than expected GDP growth partly reflected a surge in consumer spending, which soared by 4.0 percent in the third quarter after climbing by 0.8 percent in the second quarter.

The resilience of the U.S. economy added to recent concerns about the Federal Reserve leaving interest rates higher for longer than investors had hoped.

“The Fed will see the third quarter’s surge in GDP as evidence that the economy is robust, and that restrictive interest rates continue to be appropriate near-term,” said Bill Adams, Chief Economist for Comerica Bank.

He added, “That means that the Fed will be on hold for a while even if inflation slows further near-term—and with gas prices down sharply in October, the next CPI report will probably be a cool one.”

The Commerce Department also released a report showing new orders for U.S. manufactured durable goods spiked by much more than expected in the month of September.

The report said durable goods orders soared by 4.7 percent in September following a revised 0.1 percent dip in August.

Economists had expected durable goods orders to jump by 1.5 percent compared to the 0.1 percent uptick that had been reported for the previous month.

Excluding orders for transportation equipment, durable goods orders climbed by 0.5 percent in September, matching the increase in August. Ex-transportation orders were expected to rise by 0.2 percent.

Meanwhile, the Labor Department released a report showing first-time claims for U.S. unemployment benefits edged higher in the week ended October 21st.

The report said initial jobless claims rose to 210,000, an increase of 10,000 from the previous week’s revised level of 200,000. Economists had expected jobless claims to rise to 208,000 from the 198,000 originally reported for the previous month.

Sector News

Computer hardware stocks saw considerable weakness on the day, with the NYSE Arca Computer Hardware Index tumbling by 2.5 percent to a nearly five-month closing low.

Shares of Western Digital (WDC) moved sharply lower after a report from the Nikkei newspaper said the company and Japan’s Kioxia Holdings have called off merger talks.

Significant weakness was also visible among software stocks, as reflected by the 2.5 percent slump by the Dow Jones U.S. Software Index.

Oil service stocks also came under pressure amid a steep drop by the price of crude oil, dragging the Philadelphia Oil Service Index down by 2.3 percent.

The sell-off by oil service stocks comes amid a steep drop by the price of crude oil, with crude for December delivery tumbling $1.67 to $83.72 a barrel.

Transportation and pharmaceutical stocks also saw notable weakness, while commercial real estate, financial and housing stocks bucked the downward trend.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region moved mostly lower during trading on Thursday. Japan’s Nikkei 225 Index dove by 2.1 percent, while South Korea’s Kospi plummeted by 2.7 percent.

The major European markets also moved to the downside on the day. While the German DAX Index slumped by 1.1 percent, the U.K.’s FTSE 100 Index slid by 0.8 percent and the French CAC 40 Index fell by 0.4 percent.

In the bond market, treasuries moved notably higher despite the upbeat U.S. economic data. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, tumbled 10.8 basis points to 4.845 percent.

Looking Ahead

The Commerce Department’s report on personal income and spending in September is likely to be in focus on Friday, as it includes readings on inflation said to be preferred by the Federal Reserve.

Trading may also be impacted by reaction to the latest earnings news, with Amazon (AMZN) and Intel (INTC) among the companies releasing their quarterly results after the close of today’s trading.

Energy giants Chevron (CVX) and Exxon Mobil (XOM) are also among the companies due to report their results before the start of trading on Friday.

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