US close: Stocks negative after Powell suggests faster rate hikes

dl jerome powell federal reserve open market committee virtual press conference 3 november 2021 chair fomc fed jay pd — Fed chair Jerome PowellSharecast / public domain image

Wall Street stocks closed below the waterline on Thursday, swinging sharply negative in afternoon trading after Federal Reserve chair Jerome Powell signalled a likely 50-basis point rate hike next month.

At the close, the Dow Jones Industrial Average was down 1.05% at 34,792.76, as the S&P 500 lost 1.48% to 4,393.66 and the Nasdaq Composite was off 2.07% at 13,174.65.

The Dow closed 368.03 points lower on Thursday, reversing the gains recorded in the previous session.

Fed head Powell said he supported the central bank hastening its rate hikes in a bid to put a lid on red-hot inflation, at an event in Washington hosted by the International Monetary Fund.

“It is appropriate in my view to be moving a little more quickly,” the Federal Reserve chair said, briefly turning attention from earnings season and back to the Fed’s response to an escalating cost-of-living crisis.

On the macro front, first-time jobless claims in the US held near their cycle lows during the past week, according to the Department of Labor, with filings for initial unemployment claims drifting lower by 2,000 to 184,000 over the week ended 16 April.

The four-week moving average, which aims to smooth out the fluctuations in the figures from one week to another, rose by 4,500 to 177,250, while secondary unemployment claims, which are those not being filed for the first time and referencing the week ending on 9 April, dropped by 58,000 to approximately 1.42m - a near half-century low.

In other data news, the Philadelphia Fed's manufacturing index fell to 17.6 in April, down from 27.4 in March and below expectations for a print of 21, while the Conference Board's leading economic index increased 0.3% in March to 119.8.

Elsewhere on the geopolitical front, Joe Biden announced that the US would provide another $800.0m in military assistance to Ukraine in order to "further augment Ukraine's ability to fight in the east, in the Donbas region".

"We're in a critical window of time now where (Russian forces are) going to set the stage for the next phase of this war," the US president said.

"The United States and our partners and allies are moving as fast as possible to continue to provide Ukraine with the equipment it needs, its forces need, to defend its nation."

In the corporate space, electric car maker Tesla rose 3.23% after posting a jump in first-quarter profits and revenues overnight, surpassing analysts' expectations thanks to higher prices and solid demand.

Profits surged to $3.3bn from $438.0m in the first quarter of last year, on revenues of $18.8bn, up from $10.4bn.

Revenues came in nearly $1.0bn above expectations, while total deliveries rose 68% year-on-year to a record 310,048.

“If Tesla is still able to report good sales and earnings figures then things can’t be as bad as feared,” said IG chief market analyst Chris Beauchamp.

“If consumer spending is holding up well enough for Tesla to keep reporting decent numbers, then the market appears to be more confident that the US economy, and others too, can withstand the current expectations around inflation and interest rates.”

Elsewhere, AT&T was up 4.01% after it posted a 2.5% jump in core revenues to $29.7bn.

Philip Morris International managed gains of 1.95% despite lowering its full-year earnings forecasts.

The tobacco giant said it had been impacted by the pullback of its Russian operations, higher costs and a slower-than-expected recovery in its Asian duty-free business.

American Airlines ascended 3.8% after forecasting a second-quarter pre-tax profit, as strong bookings helped it cover soaring fuel costs.

The legacy carrier said March was the first month since the onset of the Covid-10 pandemic that revenue had surpassed 2019 levels.

On the downside, Xerox tumbled 15.67% after reporting a 38 cent loss per share, a marked turnaround when compared to earnings per share of 18 cents posted at the same time a year earlier.

Dow Jones - Risers

Dow Chemical Co. (DOW) $69.51 2.92%
International Business Machines Corporation (CDI) (IBM) $139.85 1.11%
Verizon Communications Inc. (VZ) $55.01 1.10%
3M Co. (MMM) $151.77 0.78%
Walgreens Boots Alliance, Inc. (WBA) $46.81 0.58%
Coca-Cola Co. (KO) $66.21 0.38%
Walmart Inc. (WMT) $159.87 0.15%
Amgen Inc. (AMGN) $255.46 0.03%
Honeywell International Inc. (HON) $230.94 0.00%
Dowdupont Inc. (DWDP) $30.52 0.00%