U.S. stock indexes fell on Thursday as mixed economic data and hawkish comments from a Federal Reserve official fueled concerns that the central bank may not ease its aggressive policy tightening.
St. Louis Federal Reserve President James Bullard said rate hikes so far “have had only limited effects on observed inflation,” and that the central bank needs to continue raising interest rates by at least another full percentage point.
Bullard’s comments come as strong retail sales numbers on Wednesday stoked concerns that the Fed would keep raising borrowing costs, even as evidence of cooling inflation gives the central bank room to reduce the size of its rate hikes.
Several other Fed officials in recent days have also stressed the need to continue raising rates, albeit at a slower pace.
“The Fed is trying to make sure the market doesn’t get too ahead of itself,” said Tim Holland, chief investment officer at Orion Advisor Solutions.
“They’re trying to walk this rhetorical tightrope where in between meetings and big data points, they’re reminding the market that they’re still tightening.”
Traders are now pricing in 89% odds of a 50-basis-point rate hike from the Fed in December and see terminal rate at around 5% in June 2023.
Data showed the number of Americans filing new claims for unemployment benefits fell last week, indicating a still tight labor market that allows Fed room for further tightening, denting market sentiment.
Wall Street closed lower on Wednesday as a grim outlook from Target Corp (TGT.N) sparked concerns about retailers heading into the crucial holiday season.
The S&P 500 (.SPX) has gained more than 6% from its October closing lows on hopes of a less hawkish Fed, though the index has logged steep losses so far this year on fears of a recession stemming from the hefty interest rate hikes.
At 10:07 a.m. ET, the Dow Jones Industrial Average (.DJI) was down 265.98 points, or 0.79%, at 33,287.85, the S&P 500 (.SPX) was down 45.82 points, or 1.16%, at 3,912.97, and the Nasdaq Composite (.IXIC) was down 140.01 points, or 1.25%, at 11,043.65.
Roku Inc’s (ROKU.O) shares fell 3.3% as the streaming platform said it plans to cut 200 jobs.
Declining issues outnumbered advancers for a 6.58-to-1 ratio on the NYSE and for a 3.72-to-1 ratio on the Nasdaq.
The S&P index recorded no new 52-week high and one new low, while the Nasdaq recorded 12 new highs and 101 new lows.