Wall Street closes down, Dow snaps longest winning streak since 1987
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[July 28, 2023] By
Carolina Mandl and Herbert Lash
(Reuters) - U.S. stocks ended lower on Thursday after news that the Bank
of Japan will allow long-term interest rates to rise sent U.S. yields
higher, snapping the longest winning streak for the Dow since 1987.
The Nikkei newspaper reported the central bank will maintain its 0.5%
cap for the 10-year government bond yield, but discuss allowing
long-term interest rates to rise above that level by a certain degree.
Reuters confirmed the central bank may make minor tweaks to extend the
lifespan of its yield control policy.
Michael Green, chief investment strategist at Simplify Asset Management,
said reports of the Bank of Japan's plans were the biggest driver behind
Wall Street's performance on Thursday.
Higher rates in Japan pushed the U.S. 10-year yield over 4% and reduced
the attractiveness of stocks.
The Dow Jones Industrial Average fell 237.4 points, or 0.67%, to
35,282.72, the S&P 500 lost 29.29 points, or 0.64%, to 4,537.46 and the
Nasdaq Composite dropped 77.18 points, or 0.55%, to 14,050.11.
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On Wednesday, the U.S. Federal Reserve raised interest rates by 25 basis
points as expected. Traders now only see a 20% chance that the Fed could
surprise with a quarter-point increase in September. [FEDWATCH]
Fed Chair Jerome Powell said on Wednesday that Fed staff are no longer
forecasting a U.S. recession, but did not rule out another rate hike,
saying the Fed would follow future economic data.
On Thursday, a Commerce Department report showed the U.S. economy grew
faster than expected in the latest quarter, with an advance gross
domestic product reading of 2.4%, above the 1.8% forecast by economists
polled by Reuters.
Kim Rupert, managing director of global fixed income at Action Economics
in San Francisco, said the strong economic data earlier in the day also
made the market reassess its positioning after the Federal Reserve
slightly upgraded its growth outlook on Wednesday.
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A trader works on the floor of the New
York Stock Exchange (NYSE) in New York City, U.S., July 26, 2023.
REUTERS/Brendan McDermid/File Photo
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"The markets are looking at the increased potential for another Fed
rate hike that had largely been priced out. Now it's being priced
back in," said Rupert, who expects a Fed rate hike in September.
Meta gained 4.40% after it reported a jump in second-quarter
advertising revenue, topping Wall Street financial targets.
Microsoft, which on Tuesday surpassed estimates for quarterly
revenue and profit, closed down 2.09%, as it laid out an aggressive
spending plan to meet demand for its new artificial intelligence
(AI)-powered services.
Outsized gains in megacap growth stocks have helped the Nasdaq lead
the charge on Wall Street so far this year, with the index rising
about 34%.
EBay forecast third-quarter profit below market expectations as the
e-commerce platform spent more to bolster categories such as auto
parts, refurbished goods and collectibles, sending its shares down
10.53%.
Chipmakers Nvidia and Micron rose 0.99% and 5.48% respectively after
Lam Research forecast upbeat quarterly sales. Shares of Lam also
advanced.
Southwest Airlines tumbled 8.94% after the airline posted a dip in
second-quarter profit, while Royal Caribbean surged after the cruise
operator lifted its annual profit forecast.
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Elsewhere, the European Central Bank raised interest rates for the
ninth consecutive time and kept the door open to further tightening.
(Reporting by Bansari Mayur Kamdar and Johann M Cherian in Bengaluru;
Editing by Shinjini Ganguli, Maju Samuel and Deepa Babington)
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