Stock losses accelerated in mid-morning trading as investors digest the impact of disappointing Big Tech earnings reports, coupled with rising bond yields.
The tech-heavy Nasdaq (^IXIC) led the declines, down about 1.2% while S&P 500 (^GSPC) dropped about 0.7%. The Dow Jones Industrial Average (^DJI) dipped 0.4%, or more than 130 points.
Tech stocks remain under pressure after booking their worst single-day performance in eight months on Wednesday. Concerns are growing that valuations are too high in a world of surging Treasury yields.
On Thursday, the benchmark 10-year yield (^TNX) fell 5 basis points to trade near 4.90% after the latest GDP reading came in hot, with the US economy growing at its fastest pace in nearly two years.
The Bureau of Economic Analysis’s advance estimate of third quarter US gross domestic product (GDP) showed the economy grew at an annualized pace of 4.9% during the period, faster than consensus forecasts.
The strong data comes despite the Federal Reserve’s higher for longer interest rate mantra, which has failed to constrain the American consumer. The Fed’s next interest rate decision is scheduled for Nov. 1
Read more: What the Fed rate-hike pause means for bank accounts, CDs, loans, and credit cards
Other central banks are beginning to shift their monetary policy. On Thursday, the European Central Bank held interest rates steady for the first time in over a year following 10 consecutive rate increases.
The ECB said it would hold its deposit rate at a record high 4%. The bank maintained its previous guidance of steady policy moving forward.
Stocks extend losses, led by Nasdaq
Stock losses accelerated with the tech-heavy Nasdaq Composite (^IXIC) falling 1.2% followed by the S&P 500’s (^GSPC) drop of about 0.7%. The Dow Jones Industrial Average (^DJI) dipped 0.4%.
The benchmark 10-year yield (^TNX) fell 5 basis points to trade near 4.90% after the latest GDP reading came in hot, with the US economy growing at its fastest pace in nearly two years.
Wall Street’s executive shakeup
Longtime Morgan Stanley (MS) veteran Ted Pick will succeed CEO James Gorman at the start of 2024 —ending the highly-watched search for a successor.
In May, Morgan Stanley announced Gorman would step down and would select his successor from one of the bank’s three main division heads.
Shares were up more than 1% on Thursday following the announcement.
As Yahoo Finance’s David Hollerith reports:
The 54-year-old Pick is a 33-year veteran of Morgan Stanley who currently leads the company’s institutional securities division, which oversees investment banking and trading. He previously was global head of sales and trading, where he led a turnaround in the fixed-income trading division.
Andy Saperstein and Dan Simkowitz, two other Morgan Stanley executives considered to be in the running for the job, were also given new titles and responsibilities.
Saperstein, who had been co-president alongside Pick, will keep his co-president title and also become head of wealth and investment management. Simkowitz will also get a co-president title and become the head of institutional securities. Gorman, 65, will become executive chairman.
The transition brings to an end the tenure of one of the longest-serving CEOs on Wall Street. Gorman took over in 2010 as the firm faced questions about its survival in the aftermath of the 2008 financial crisis.
Read more here.
Ford, UAW reach tentative deal
Ford (F) and the United Auto Workers (UAW) reached a tentative labor deal late Wednesday — a sign that the autos strike, now the longest in 25 years, could be nearing an end.
Ford shares were flat in early trading on Thursday following the news.
As Yahoo Finance’s Pras Subramanian reports:
The UAW said the tentative agreement includes a 25% base wage increase through April 2028 and will cumulatively raise the top wage by over 30% to more than $40 an hour and raise the starting wage by 68% to over $28 an hour. The lowest-paid workers at Ford will see a raise of more than 150% over the life of the agreement, with some workers receiving an 85% increase immediately upon ratification.
The UAW also revealed COLA (cost-of-living allowance) provisions were reinstated, along with a new three-year wage progression scale (previously it was eight years), as well as the end of wage tiers. The union said it secured gains for workers with pensions and 401(k) plans but did not reveal exact specifics.
The deal is still subject to approval by UAW’s National Ford Council and ratification by a simple majority vote of the UAW’s 57,000 Ford workers.
Read more here.
Stocks fall at market open
Stocks opened lower with the tech-heavy Nasdaq Composite (^IXIC) the biggest loss leader of the early morning session, down about 0.5% on the heels of disappointing tech earnings. The Dow Jones Industrial Average (^DJI) dipped 0.1% while the benchmark S&P 500 (^GSPC) dropped about 0.4%.
Royal Caribbean, UPS, and Ford: Stocks trending in premarket trading
Here are some of the stocks leading Yahoo Finance’s trending tickers page in premarket trading on Thursday:
Royal Caribbean (RCL): Shares were up by over 2% premarket. The cruise liner raised its full-year profit forecast on Thursday.
UPS (UPS): UPS shares fell 4% after cutting its 2023 revenue forecast due to weak demand.
Ford (F): Shares rose over 2%. On Wednesday, Ford announced it had reached a tentative deal to return 16,000 striking workers back to work within a few days and pay workers 25% more between 2023 and 2028.
Southwest Airlines (LUV): Southwest shares dropped 3% after reporting a fall in profit due to soaring labor and fuel costs.
GDP: US economy grows 4.9% amid strong consumer spending
The US economy grew at its fastest pace in nearly two years during the past three months as consumers stepped up their spending despite a high interest rate environment.
As Yahoo Finance Josh Schafer reports:
The Bureau of Economic Analysis’s advance estimate of third quarter US gross domestic product (GDP) showed the economy grew at an annualized pace of 4.9% during the period, faster than consensus forecasts. Economists surveyed by Bloomberg estimated the US economy grew at an annualized pace of 4.5% during the period.
The reading came in higher than second quarter GDP, which was revised down to 2.1%.
The GDP release highlights the resilience of the US consumer despite ongoing concerns of a slowdown. But many economists see this as the high-water mark for economic growth before the credit tightening induced by the Federal Reserve’s interest rate hikes and the recent rise in bond yields grabs hold of business development and consumer spending.
Read more here.
Stock futures point to a return to sell-off
Wall Street stocks were on track Thursday to add to the previous day’s sharp losses, as investors looked ahead to fresh earnings releases.
Futures on the Dow Jones Industrial Average (^DJI) were down 0.41%, or 136 points, while S&P 500 (^GSPC) futures shed 0.67%. Contracts on the tech-heavy Nasdaq 100 (^NDX) were 0.95% lower.
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Barbara Terrio is a seasoned business journalist, delving into the world of finance, startups, and entrepreneurship. With a knack for demystifying complex economic trends, she helps readers navigate the business landscape. Outside of her reporting, Barbara is an advocate for financial literacy and enjoys mentoring aspiring entrepreneurs.