Wall Street ended sharply lower on Thursday after unexpectedly strong inflation data and a drop in weekly jobless claims added to fears that the U.S. Federal Reserve will keep raising interest rates to tame high prices. The TSX tracked the move, although losses were capped by slight gains in the heavily weighted financials and materials sectors.
A Labor Department report showed monthly producer prices accelerating in January with the producer price index (PPI) for final demand up 0.7% compared with economist expectations of 0.4%. In the 12 months through January, PPI increased 6.0% compared with expectations for a 5.4% increase.
Meanwhile, the number of Americans filing new claims for unemployment benefits unexpectedly fell last week, offering more evidence that the labour market remains tight.
Thursday’s economic data and other reports this week paint a picture of still-stubborn inflation and an economy that remains relatively strong in the face of the Fed’s rate hike campaign.
“With data like this, the Fed is going to keep raising rates, and none of us want that,” said Tim Ghriskey, senior portfolio strategist at Ingalls & Snyder in New York. “There are at least whispers now of the possibility of a 50 basis point hike at the next meeting.”
After a selloff in 2022, the S&P 500 has climbed about 7% so far in 2023, fueled by upbeat earnings and cautious expectations the U.S. central bank has completed the brunt of its rate hike campaign.
The Fed is seen pushing the benchmark rate above the 5% mark by May and keeping it above those levels till the year-end.
Also on Thursday, Cleveland Fed President Loretta Mester said inflation remains too high, and noted that she was open to raising rates by more than what her colleagues wanted at the last monetary policy meeting. St. Louis Fed President James Bullard said continued rate increases will “lock in” slowing inflation, even with continued economic growth.
Selling on Wall Street accelerated late in the session. The S&P 500 declined 1.38% to end at 4,090.51 points.
The Nasdaq declined 1.78% to 11,855.83 points, while Dow Jones Industrial Average declined 1.26% to 33,696.39 points.
The Toronto Stock Exchange’s S&P/TSX composite index ended down 113.97 points, or 0.6%, at 20,606.42, extending this month’s sideways pattern after notching a near eight-month high at the end of January.
Shares of e-commerce giant Shopify Inc slumped 15.5% as the technology company forecast slowing revenue growth for the current quarter.
Technology has been on a tear since the start of the year after falling sharply in 2022. The sector fell 5.2% on Thursday, while energy ended 1.6% lower as the price of oil settled down 0.1% at $78.49 a barrel.
Cenovus Energy named Chief Operating Officer Jon McKenzie as its next president and chief executive, as Canada’s second-largest oil and gas producer swung to a fourth-quarter net profit from a loss last year. Its shares ended 4.5% lower.
In the U.S., Tesla Inc slid 5.7% as the electric vehicle maker said it was recalling 362,000 U.S. vehicles and fixing them via an over-the-air software update after the U.S. auto regulator said its Full Self-Driving Beta software may cause a crash.
Traders exchanged $47 billion worth of Tesla shares, accounting for a fifth of all transactions in S&P 500 stocks.
Cisco Systems Inc rose 5.2% and hit a nine-month high after the network gear maker raised its full-year earnings forecast.
Roku Inc soared 11% after the video streaming company forecast first-quarter revenue above market estimates.
Across the U.S. stock market, declining stocks outnumbered rising ones by a 2.5-to-one ratio. The S&P 500 posted 9 new highs and 1 new lows; the Nasdaq recorded 90 new highs and 58 new lows. Volume on U.S. exchanges was relatively light, with 11.0 billion shares traded, compared to an average of 11.7 billion shares over the previous 20 sessions.
Reuters, Globe staff
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