By Joy Wiltermuth and William Watts
U.S. stocks closed lower Thursday, but were off the session’s ugliest levels, after Federal Reserve Chairman Jerome Powell was voted in by Congress to serve a second term of four years.
Before Powell’s confirmation, the S&P 500 had been veering close to bear-market territory.
The Dow Jones Industrial Average /zigman2/quotes/210598065/realtime DJIA +0.23% fell 103.81 points, or 0.3%, to end at 31,730.30, about 500 points off the session’s low, but extending its losses to a sixth day in a row.
The S&P 500 /zigman2/quotes/210599714/realtime SPX +0.36% shed 5.10 points, or 0.1%, closing at 3,930.08.
The Nasdaq Composite /zigman2/quotes/210598365/realtime COMP +0.35% eked out a gain of 6.73 points, or 0.1%, to finish at 11,370.96.
On Wednesday, the Dow Jones Industrial Average fell 327 points, or 1.02%, to 31,834, the S&P 500 declined 66 points, or 1.65%, to 3,935, and the Nasdaq Composite dropped 373 points, or 3.18%, to 11,364.
The S&P 500 has dropped 18.1% from its record high set on Jan. 3. A close at or below 3,837.249 would put the large-cap benchmark into a bear market — defined as a drop of 20% from a recent peak.
What drove markets
Stocks pared losses in choppy trade Thursday after Federal Reserve Chairman Jerome Powell was given more time to dramatically pull back the central bank’s easy-money stance to battle inflation before it wrecks the economy.
Equities initially rallied following fresh economic data that showed slowing wholesale inflation in April, but swung lower in afternoon trade as investors focused on the potential ramifications of still intense price pressures. While meeting forecasts, prices rose 0.5% in April, from a 1.6% jump in March. Price gains over the year slowed to 11% from 11.5%.
At the session’s worst levels, the S&P 500 index traded precariously close to a bear market for the first time since 2020.
“The market is reacting to inflation data that feeds into what the Fed is going to do,” said James Ragan, director of Wealth Management Research at DA Davidson & Co., by phone. “There’s definitely a bearish economic opinion forming that there is a possibility of a looming recession.”
While DA Davidson’s own house view has been a “bit more optimistic,” given the strong labor market, Ragan said a real concern is that households cut back on spending. “Inflation is a scary thing,” he said. “If everybody pulls back a little bit, it could drag down the economy.”
Inflation data released Wednesday may have s hown a peak in price growth , but the figures were hotter than forecast. Core CPI, which excludes energy and food and tends to be a better predictor of future inflation, surprisingly accelerated in April.
“At least it’s peaked, for now,” said Eric Lynch, managing director at Scharf Investments, about the inflation readings. “The question is do we go to 4% relatively quickly or 6%?” he said by phone.