Wall Street Experiences Dip as Investors Reflect on Economic Data Post-Rally

By Echo Wang

NEW YORK (Reuters) - On Thursday, Wall Street saw a slight decline as investors took time to evaluate important economic data in anticipation of the Federal Reserve's meeting coming next week.

The Nasdaq index made headlines on Wednesday by crossing the 20,000 mark for the first time, driven by a robust rally in technology stocks. This rally was further fueled by a recent inflation report that met expectations, solidifying predictions for a 25-basis-point rate cut at the Fed's gathering on December 17-18.

However, initial claims for unemployment benefits in the U.S. unexpectedly rose last week, raising some eyebrows about the strength of the labor market. On a related note, U.S. producer prices increased more than anticipated in November, despite a decrease in service costs suggesting a persistent overall disinflationary trend.

Rob Haworth, a senior investment strategist at U.S. Bank Wealth Management in Seattle, commented, "Investors are just trying to figure out what the Fed's next steps will be. Will inflation become a significant issue, compelling the Fed to slow down on rate cuts, or are they on the right track?" He also noted that there was some profit-taking happening after the Nasdaq reached an all-time high the previous day.

Trader expectations for a rate cut next week are high, with bets standing above 98%, according to CME's FedWatch Tool. However, insights suggest a potential pause in January, influenced by several Fed officials who advised caution regarding the pace of monetary easing as the economy shows resilience.

As of 1:50 p.m. EST (1950 GMT), the Daw Jones Industrial Average fell by 144.71 points, or 0.33%, reaching 44,004.27. The S&P 500 decreased by 14.59 points, or 0.24%, settling at 6,069.60, while the Nasdaq slid by 46.62 points, or 0.23%, to 19,988.28.

Out of the 11 major sub-sectors in the S&P, eight reported declines, with the healthcare sector being the worst performer, falling by 0.6%. Meanwhile, performances among large-cap and growth stocks were mixed. Notable changes included Microsoft seeing a rise of 1.12%, while Nvidia fell by 0.78%. Additionally, Adobe experienced a significant drop of 13.27% after forecasting revenue for fiscal 2025 below expectations, impacting the broader tech sector.

This year, Wall Street's main indexes have repeatedly achieved record highs, largely driven by surges in major tech stocks that benefitted from excitement surrounding advancements in artificial intelligence and the Fed's interest rate cuts.

The U.S. stock market ended a strong November following Donald Trump's presidential election success, buoyed by forecasts of business-friendly policies that could enhance corporate profitability. The beginning of December has started on a generally optimistic note.

In other market activities, Warner Bros Discovery saw a substantial gain of 14.97% after announcing plans to separate its declining cable-TV business from its streaming and studio operations. On the flip side, Nordson fell by 9%, projecting fiscal 2025 revenue lower than Wall Street forecasts, while health insurer Centene rose by 2.41% after estimating its 2025 profit would exceed expectations.

Overall, declining stocks outnumbered advancing ones by a ratio of 2.24-to-1 on the New York Stock Exchange. There were 94 new highs and 75 new lows recorded on the NYSE. The S&P 500 noted 10 new 52-week highs alongside seven lows, while the Nasdaq Composite saw 77 new highs against 116 new lows.

WallStreet, Investors, Economy