US stocks fell on Thursday as lower commodity prices and nervousness about the health of regional banks undermined optimism that the Federal Reserve is set to halt its campaign of interest rate hikes.
Of Wall Street The benchmark S&P 500 fell 0.2%, snapping a four-day winning streak.
Disney was the index’s worst performer after reporting a decline in subscribers to its streaming business. Energy stocks fell as oil prices fell nearly 2%.
PacWest shares fell 23% after the bank announced it lost nearly a tenth of its deposits in the first week of May. The KBW regional bank index fell by 2.4%.
“With yet another regional bank taking emergency action in response to fleeing customers, worries about the fragility of the [ . . . ] sector show little sign of abating,” said Susannah Streeter, head of money and markets at Hargreaves Lansdown.
The moves came despite a couple of economic releases that provided further signs that the Fed is making progress on easing inflation. US initial jobless claims hit their highest level since October 2021, signaling a weakening labor market, which should ease pressure on wage growth. A separate report showed producer price inflation for April was slightly lower than expected.
The tech-heavy Nasdaq Composite stock index, however, rallied 0.2%, thanks in part to a 4% rise in shares of parent Google Alphabet after it unveiled a artificial intelligence-powered search engine at its annual developer conference.
Michael Metcalfe, Head of Macro Strategy at State Street Global Markets, said: “There is a push and pull between micro factors, such as declines in deposits reported at some banks, versus macro hopes of a peak and eventually a decline in lower interest rates.”
Uncertainty over the US debt ceiling continues to cast a shadow on markets after US Treasury Secretary Janet Yellen warned earlier this month that the government could run out of money on June 1st.
JPMorgan Chase chief executive Jamie Dimon warned on Thursday that the debt ceiling crisis could trigger a “panic” in the markets. His remarks came after former US President Donald Trump on Wednesday urged Republican lawmakers to let the government default on its debts unless Democrats capitulated to calls for “massive” spending cuts .
The dollar rose 0.6% against a basket of six other currencies.
The yield on the interest rate sensitive two-year Treasury note remained roughly unchanged at 3.89%, while the yield on the 10-year note fell 0.06 percentage point to 3.38%. Bond yields fall when prices rise.
The tightening in sentiment spread to European markets, with the regional Stoxx 600 reversing its morning gains to finish the day flat. Germany’s Dax fell 0.4%, while France’s CAC 40 finished up 0.3%.
London’s FTSE 100 fell 0.1% after the Bank of England lifted up its benchmark rate for the twelfth time in a row, by 0.25 percentage points to 4.5 per cent, as had been anticipated by the markets. Traders expect BoE rates to peak at 4.75% in September.
The pound weakened against the dollar on the day of the announcement, falling 0.9% to $1.25.
Asian stocks struggled to find direction after weak inflation data in China pointed to weakening demand, but traders hoped the same US soft data would support equity market valuations. Consumer price inflation in China slowed to the weakest level in two years.
Hong Kong’s Hang Seng and Japan’s Topix both lost 0.1%. China’s CSI 300 ended 0.2% down.
Additional reporting by William Langley in Hong Kong
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