US Stocks Decline Amid Economic Concerns Despite Optimism Over Rate Cuts

On Thursday, U.S. stocks experienced a decline despite increased optimism about a potential rate cut in September and a positive outlook from tech giant Meta Platforms. Economic data raised concerns about a slowdown in economic activity.

By 11:18 ET (13:35 GMT), the Dow Jones Industrial Average had dropped 462 points, or 1.13%, the S&P 500 had fallen 35 points, or 0.6%, and the NASDAQ Composite had decreased by 156 points, or 0.9%.

The market reaction came after initial jobless claims rose to 249,000 for the week ending July 27, higher than anticipated. Additionally, the ISM manufacturing index for July was reported at 46.8, below the forecasted 48.2. These figures fueled worries about a slowing economy.

Fed Signals Possible Rate Cuts, Cites Inflation Progress

The Federal Reserve kept interest rates unchanged at the conclusion of its two-day meeting on Wednesday, as was widely expected. Fed Chair Jerome Powell noted progress in reducing inflation and cooling the labor market, indicating the possibility of a rate cut in September. However, he emphasized that any decision would depend on forthcoming economic data.

The Fed will have several inflation and labor market reports to review before its September meeting. According to the CME FedWatch tool, markets are now almost fully pricing in a 25 basis point cut in September.

Attention is now on the upcoming nonfarm payrolls data, due on Friday, which will provide further insights into the labor market. This follows Thursday’s data showing that the number of Americans filing new unemployment claims reached an 11-month high last week, with initial claims for state unemployment benefits rising by 14,000 to a seasonally adjusted 249,000 for the week ending July 27, the highest level since August of the previous year.

Tech Sector Rallies with Meta Leading; Apple and Amazon Earnings Awaited

Technology stocks saw increased demand following Meta Platforms’ (NASDAQ) stronger-than-expected second-quarter earnings and optimistic outlook, leading to a more than 9% rise in its stock.

Meta’s positive performance helped investors overlook mixed results from Microsoft Corporation (NASDAQ), which missed estimates. However, chip designer Arm Holdings (NASDAQ) reported weak earnings, causing its stock to drop by 10%.

The tech earnings season continues with major reports from Apple (NASDAQ) and Amazon (NASDAQ) expected on Thursday.

Other Market Movers

Elsewhere, Moderna (NASDAQ) saw its stock fall by 17% after cutting its full-year revenue guidance, citing lower-than-expected sales in the EU and a competitive vaccine market in the U.S.

Eli Lilly (NYSE) shares rose by 3.7% following trial results showing that its weight loss drug, Zepbound, reduces the risk of hospitalization and death for obese adults with a common type of heart failure.

Qualcomm (NASDAQ) stock declined by around 5% after the U.S. revoked one of its export licenses for the Chinese telecom firm Huawei, impacting its revenue outlook.

As of now, 283 companies in the S&P 500 have reported their second-quarter earnings, with 78.4% surpassing expectations, according to data from LSEG.