President-elect Donald Trump gestures after ringing the opening bell at the New York Stock Exchange, Thursday, Dec. 12, 2024, in New York.Alex Brandon/The Associated Press
U.S. and Canadian stocks pulled back on Thursday as investors evaluated key economic indicators ahead of the Federal Reserve’s meeting next week.
A Thursday Labor Department report showed U.S. producer prices rose more than forecast in November, though a moderation in service costs pointed to a continuation of the broader disinflationary trend. Initial claims for U.S. unemployment benefits unexpectedly climbed last week, raising concerns about labour-market resilience.
“Investors are just trying to suss out what is the Fed going to do next week? Is inflation really going to be a problem and the Fed has to really slow its role on rate cuts, or can they get there?” said Rob Haworth, senior investment strategist at U.S. Bank Wealth Management in Seattle. Haworth added there was profit-taking after the Nasdaq touched an all-time high on Wednesday.
The Nasdaq had surged past the 20,000 mark for the first time on Wednesday, driven by a strong rally in technology stocks. Meanwhile, the S&P 500 reached its highest level in nearly a week, buoyed by an inflation report that solidified expectations for a 25-basis-point rate cut at the Fed’s Dec. 17-18 meeting.
Trader bets on the cut next week stand at over 98%, according to CME’s FedWatch Tool. However, they indicate expectations of a pause in January after several Fed officials last week urged caution over the pace of monetary policy easing as the economy remained resilient.
The Dow Jones Industrial Average fell 234.44 points, or 0.53%, to 43,914.12, the S&P 500 lost 32.94 points, or 0.54%, to 6,051.25 and the Nasdaq Composite lost 132.05 points, or 0.66%, to 19,902.84.
In Canada, the S&P/TSX composite index closed down 246.99 points at 25,410.71, led by weakness in energy and base metals.
The January crude oil contract was down 27 cents at US$70.02 per barrel. The February gold contract was down US$47.30 at US$2,709.40 an ounce.
On Wall Street, megacap and growth stocks exhibited mixed results, with Nvidia declining 1.4%, while Microsoft gained 0.1%. Adobe plunged 13.7% after the Photoshop maker forecast fiscal 2025 revenue below Wall Street expectations, weighing on the broader technology sector.
Of the 11 major S&P sub-sectors, only consumer staples stocks gained.
Wall Street’s main indexes have hit record highs multiple times this year, fueled by a rally in heavyweight tech stocks that capitalized on enthusiasm surrounding artificial intelligence and the Fed’s interest-rate cuts.
U.S. equities concluded a strong November following Donald Trump’s presidential election victory, buoyed by expectations of business-friendly policies boosting corporate profits, and have started December on a broadly positive trajectory.
Warner Bros. Discovery soared 15.4% after the media company announced plans to separate its declining cable-TV business from streaming and studio operations.
Nordson slid 8.2% as the dispensing-equipment maker forecast fiscal 2025 revenue below Wall Street estimates, while health insurer Centene rose 1.9% after forecasting its 2025 profit above estimates.
In currency markets, the Canadian dollar weakened to a 4-1/2-year low against its U.S. counterpart as the greenback notched broad-based gains and a recent widening in the gap between U.S. and Canadian bond yields weighed on the loonie.
The Canadian currency was trading 0.2% lower at 1.4190 per U.S. dollar, or 70.47 U.S. cents.
Canada’s 2-year yield has fallen this week as much as 126 basis points below its U.S. counterpart, the largest gap since November 1997.
On Thursday, Canadian bond yields moved higher across the curve, tracking moves in U.S. Treasuries. The 10-year was up 4.8 basis points at 3.135%.
Reuters, Globe staff