The stock market experienced a volatile day on Thursday, driven by a combination of economic indicators that painted a mixed picture for the economy. A hotter-than-expected September Consumer Price Index (CPI) inflation report, coupled with a surprising surge in weekly jobless claims, created a wave of uncertainty for investors.
The annual headline inflation rate, while slightly dipping from 2.5% in August to 2.4% in September, came in higher than economist forecasts of 2.3%. Despite this marking the sixth consecutive decline in annual inflation, core inflation, which excludes volatile food and energy prices, unexpectedly rose from 3.2% to 3.3%. This marked the first increase in core inflation since March 2023.
Meanwhile, the weekly jobless claims report revealed a surprising jump to 254,000, the highest since July 2023. Some experts, like Bill Adams, chief economist at Comerica Bank, attributed the spike to temporary disruptions caused by Hurricane Helene and anticipated similar effects from Hurricane Milton in the coming weeks.
These two key data releases triggered a mixed reaction in the market. While the S&P 500 pulled back from record highs reached the previous day, the news also bolstered expectations for a 25-basis-point rate cut in November. The market-implied odds of a November rate cut rose from 76% to 86% after the reports.
The sector-specific performances showcased the market’s varied response. Utilities, which had experienced significant losses earlier in the week, saw a rebound, gaining 0.81% on the day. This suggests investors are seeking a safe haven in traditionally stable sectors amidst economic uncertainty. On the other hand, technology and consumer discretionary stocks led the declines, with losses of 0.77% and 0.61%, respectively. These sectors are often considered more sensitive to economic fluctuations and investor sentiment.
The day’s biggest gainers within the Utilities Select Sector SPDR Fund (XLU) included NextEra Energy (NEE), Duke Energy (DUK), and Eversource Energy (ES), all of which saw significant increases. In the tech sector, tracked by the Technology Select Sector SPDR Fund (XLK), First Solar (FSLR), Super Micro Computer (SMCI), and Enphase Energy (ENPH) were among the worst performers, experiencing notable declines.
The Consumer Discretionary Select Sector SPDR Fund (XLY) also saw significant losses, led by Tesla (TSLA), Ross Stores (ROST), and Lululemon Athletica (LULU). This suggests that investors may be hesitant to invest in discretionary spending sectors given the economic uncertainty surrounding inflation and potential job market weakness.
In conclusion, Thursday’s market activity was driven by a mix of economic data releases, resulting in a complex picture for investors. While the S&P 500 retreated from record highs, the market’s response to the data was not uniform, with some sectors benefiting from the news while others faced losses. The outlook for the market remains uncertain, with investors closely watching upcoming economic indicators and the Federal Reserve’s next move on interest rates.
