By Isabel Wang and Joseph Adinolfi
U.S. stocks closed lower on Thursday after another volatile session as traders reacted to data showing a sharper-than-expected rise in unemployment claims and comments from senior Federal Reserve officials who warned that the central bank is in no position to pause its aggressive interest-rate hikes.
How stocks traded
S&P 500 /zigman2/quotes/210599714/realtime SPX -0.09% fell 38.76 points, or 1%, to finish at 3,744.52.
Dow Jones Industrial Average /zigman2/quotes/210598065/realtime DJIA +0.09% lost 346.93 points, or 1.2%, ending at 29,926.94.
Nasdaq Composite /zigman2/quotes/210598365/realtime COMP -0.38% finished 75.33 points lower, or 0.7%, to 11,073.31.
On Wednesday , the Dow Jones Industrial Average fell 42 points, or 0.14%, to 30,274, the S&P 500 declined 8 points, or 0.2%, to 3,783, and the Nasdaq Composite dropped 28 points, or 0.25%, to 11,149. The S&P 500 is up 5.5% from its 2022 closing low touched on Sept. 30, but remains down 20.6% for the year to date.
What drove markets
U.S. stocks deepened their losses on Thursday in choppy trade after data showed the number of Americans applying for unemployment benefits last week jumped by 29,000 to a five-week high of 219,000 , which was more than economists had expected.
Stocks initially pared their losses in the morning after the jobless claims data added to signs that the U.S. labor market may finally be softening as the Federal Reserve hikes interest rates and takes other steps to combat inflation.
However, markets swung lower in afternoon trading as Minneapolis Fed President Neel Kashkari said that the Fed is nowhere near being able to pause its aggressive interest-rate hikes, since he sees no indication that inflation is peaking.
Fed governor Lisa Cook also said in her first public remarks on monetary policy since joining the central bank’s Washington-based board, that inflation remains “stubbornly and unacceptably high,” which “will require ongoing rate hikes and then keeping policy restrictive for some time.”
Callie Cox, U.S. investment analyst at eToro, said a pullback was likely after the S&P 500 index had rallied by more than 5% in the first two sessions of the week.
“We’ve seen such a fierce rally over the past few days and I think investors are stepping back to try and figure out how much of this is real,” Cox said.
Lately, signs of a slowing economy have helped fuel gains for stocks in what some have described as a “bad news is good news” dynamic. However, economists said in response to the jobless claims data that the labor market hasn’t deteriorated enough to impact the Fed’s calculus on interest rates.
“We expect layoffs to rise gradually over coming months in response to Fed tightening, which will weigh on demand,” said Rubeela Farooqi, chief U.S. economist at High Frequency Economics, in a note to clients. “But for now, having faced persistent labor shortages, businesses are still holding on to rather than letting go of workers.”