Benchmarks ended in the negative territory on Thursday for the second consecutive session. Fed Chief Powell’s clear indication that Fed’s next move would not be a rate cut has disappointed investors. As a result, market watchers rotated out of equities to safer havens. While, the Dow and the S&P 500 closed in the red for the second session on the trot, this marked the Nasdaq’s third consecutive session in the negative territory.
The Dow Jones Industrial Average (DJI) decreased 0.5%, to close at 26,307.79. The S&P 500 decreased 0.2% to close at 2,917.52. The tech-laden Nasdaq Composite Index closed at 8,036.77, declining 0.2%. The fear-gauge CBOE Volatility Index (VIX) decreased 6% to close at 13.92. Decliners outnumbered advancers on the NYSE by a 1.60-to-1 ratio. On Nasdaq, a 1.08-to-1 ratio favored declining issues.
How Did The Benchmarks Perform?
The Dow dropped 122.4 points to close in the red. Losses for the 30-stock index were triggered after yield on the 10-year Treasury yield hit an intraday high. Moreover, the Dow dipped by as much as 249 points at its intraday low.
The S&P 500 lost 6.2 points to also end in the red. Of the 11 major sectors of the S&P 500, seven ended in negative territory, with energy leading the decliners. The Energy Select Sector SPDR Fund (XLE (NYSE:XLE)) decreased 1.7% on Thursday.
Meanwhile, the Nasdaq tanked 12.9 points to close in the red. A broad-based decline in the tech sector weighed on the Nasdaq. Tech giants like Apple (NASDAQ:AAPL) and Facebook (NASDAQ:FB) dipped 0.7% and 0.3%, respectively. Further, the Nasdaq briefly fell below the psychological 8,000 level. Apple carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Powell’s No Rate Cut Comment Drags Markets Lower
Markets continued to bleed for the second session on the trot after Fed Chie’s comments that he saw “no strong case” in expecting a rate-cut by the Fed in the near term. At the end of its two-day policy meeting on May 1, members of the Fed voted unanimously to keep the benchmark interest rates unchanged in the range of 2.25% to 2.5%.
Senior officials from the Fed remained optimistic about the U.S. economy. The Fed reduced the interest paid on excess reserves of banks by 0.05% to 2.35%. Despite Fed’s acknowledgement that core as well as overall inflation levels “have declined and are running below,” Fed Chief Jerome Powell stated in the press conference post the meeting that he believed that the U.S. was “on a good path.” He further stated that a cool-down inflation levels is “transient.”
Meanwhile, the CME Group (NASDAQ:CME) predicted that there is a 49.6% probability that there may be a slash in interest rates by the Fed. Fed’s indication to not alter the decision of its “patient” rate-hike approach and a hawkish stance related to inflation levels in the economy weighed on the investor sentiment.
Economic Data
On the economic data front, the Commerce Department stated that factory orders increased 1.9% in March. The consensus estimate for the period was 1.2%
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