Investing.com – Wall Street pulled back from near record highs on Thursday amid bearish bets from billionaire investors and signs of fatigue in the global economy.
At 15:31GMT or 11:31AM ET, the Dow 30 retreated 72 points, or 0.40%, the S&P 500 fell 9 points, or 0.44%, while the tech-heavy NASDAQ Composite gave up 21 points, or 0.42%.
After the World Bank cut its 2016 global growth forecast on Wednesday, citing "sluggish growth in advanced economies, stubbornly low commodity prices, weak global trade, and diminishing capital flows," billionaire investors came out of the woodwork to warn about equity valuations in a sluggish global environment.
A Wall Street Journal report after the prior session’s close revealed that the billionaire investor George Soros had returned to trading with large, bearish investments.
The financial newspaper quoted people close to the matter as stating that Soros was concerned about the outlook for the global economy and was looking to profit from what he expected to be economic troubles.
On Thursday, fellow billionaire investor Carl Icahn backed Soros’ idea, saying that stock valuations were being propped up.
“I don’t think you can have zero interest rates for much longer without having these bubbles explode on you,” Icahn warned in an interview with CNBC.
With the blackout period for Federal Reserve (Fed) officials in full effect ahead of the June 14-15 monetary policy meeting, eyes focused on European Central Bank (ECB) president Mario Draghi who painted a somber picture of the euro area economy.
In a dire speech delivered in the Brussels Economic Forum, Draghi promised that the ECB would not undershoot its inflation objection for longer than is avoidable, but urged governments to ensure that “output is returned to potential before subpar growth causes lasting damage.”
The warning came on the back of gloomy data from Japan where core machinery orders tumbled 11%, suggesting that weak business investment will probably continue to persist throughout 2016.
In Germany, exports stagnated in April, though the read was better than the forecast for a 0.6% decline.
However, economic news was brighter stateside as weekly jobless claims showed a continued firming of the U.S. labor market, removing some of the bad taste left from Friday’s dismal employment report.
Additionally, April wholesale inventories recorded their largest increase in 10 months which could imply a boost to economic growth in the second quarter.
In any case, financial markets continued to rule out a June rate hike from the U.S. central bank with Fed fund futures putting the odds at just 3.8% and the first move not priced in until the December 14 decision.
That said, a Reuters poll released on Thursday showed that about 80% of economists surveyed predicted that the Fed would raise rates at either the July or the September meeting.
In big moves on earnings, Restoration Hardware Holdings Inc (NYSE:RH) tumbled 20% after quarterly earnings disappointed and guidance came in far under consensus.
In positive news, JM Smucker Company (NYSE:SJM) soared more than 7% after beating with its own quarterly numbers and also providing a full year guidance above consensus forecasts.
In M&A activity, Verizon’s bid for Yahoo’s web assets was reportedly topped by other rivals, while Viacom Inc (NASDAQ:VIA) chief executive Philippe Dauman told investors that he was still looking to sell a minority stake in the company’s Paramount film unit.
Investors took profit in crude on Thursday with oil prices retreating from 11-month highs, though still remaining above $50.
U.S. crude futures lost 0.90% to $50.77 by 15:36GMT, or 11:36AM ET, while Brent oil traded down 0.80% to $52.09.