U.S. stocks struggled for direction on Thursday as investors digested hawkish remarks from Federal Reserve Chair Jerome Powell and other policymakers that cemented bets of a large interest rate hike later this month.
Powell said the central bank is “strongly committed” to bringing inflation down and needs to keep going until it gets the job done.
Chicago Fed President Charles Evans joined his fellow policymakers in saying that reining in inflation is “job one.”
Investors are also awaiting the U.S. August inflation report next week for fresh clues on whether the Federal Reserve will hike rates by half or three-quarters of a percentage point at the next policy meeting due Sept. 20-21.
“I don’t see a lot to get in the Fed’s way of hiking by another 75 basis points,” said Brian Jacobsen, senior investment strategist at Allspring Global Investments.
“If we had a big move lower with the inflation print next week … it’s probably going to be a baby step in the right direction and not a giant leap towards the 2% inflation goal.”
Money market traders see nearly 90% odds that the Fed will hikes rates by 75 basis points at this month’s meeting.
Worries over aggressive monetary tightening across the globe stalled equity markets on Thursday after the European Central Bank hiked interest rates by an unprecedented 75 basis points and signaled further hikes.
Meanwhile, data showed the number of Americans filing new claims for unemployment benefits fell last week to a three-month low, underscoring the robustness of the labor market even as the Fed raises interest rates.
With increasing odds of another outsized rate hike, the rate-sensitive S&P 500 bank index rose 2.4%.
The healthcare sector was boosted by news that Regeneron Pharmaceutical Inc’s anti-blindness treatment Eylea was shown to work as well when given at a higher dose at a longer interval between injections. The drugmaker’s shares jumped 18.9%.
Wall Street’s main indexes climbed the most in about a month on Wednesday as bond yields retreated after a recent surge that was driven by expectations of higher interest rates. Still, the benchmark S&P 500 remains nearly 8% away from its August peak and is down about 17% year-to-date.
At 12:54 p.m. ET, the Dow Jones Industrial Average was up 17.93 points, or 0.06%, at 31,599.21, the S&P 500 was up 2.28 points, or 0.06%, at 3,982.15, while the Nasdaq Composite was down 22.57 points, or 0.19%, at 11,769.33.
GameStop Corp gained 3.9% after the video game retailer reported a smaller-than-expected quarterly loss.
American Eagle Outfitters Inc fell 10.5% after the apparel maker missed second-quarter profit estimates and said it would pause quarterly dividend as it fortifies its finances against a hit from inflation.
Advancing issues outnumbered decliners by a 1.04-to-1 ratio on the NYSE and 1.06-to-1 ratio on the Nasdaq.
The S&P index recorded five new 52-week highs and eight new lows, while the Nasdaq recorded 26 new highs and 125 new lows.
(Reporting by Sruthi Shankar, Ankika Biswas and Anisha Sircar in Bengaluru; Editing by Saumyadeb Chakrabarty, Maju Samuel and Vinay Dwivedi)