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Wall Street Retreats After Robust Economic Data Weakens Rate Cut Outlook

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U.S. Stocks Fall as Strong Economic Data Reduces Rate Cut Hopes

U.S. stocks declined on Thursday as stronger-than-expected growth and employment data lowered expectations for further interest rate cuts by the Federal Reserve this year.

At 09:35 ET (13:35 GMT):

  • The Dow Jones Industrial Average slipped 90 points, or 0.2%.
  • The S&P 500 dropped 45 points, or 0.7%.
  • The NASDAQ Composite slumped 240 points, or 1.1%.

Major Wall Street indices have retreated from record highs as investors weigh stretched valuations and uncertainty over Fed policy.

Economic Strength Adds Pressure

Sentiment was dented after Fed Chair Jerome Powell warned that there is “no risk-free path” for monetary policy as the central bank balances inflation risks with a cooling labor market.

The Fed cut rates by 25 basis points last week, but the pace of future cuts remains uncertain. Investors closely reviewed weekly jobless claims and final second-quarter U.S. GDP data released Thursday.

  • Jobless claims fell to 218,000, down 14,000 from the prior week.
  • GDP growth was revised up to 3.8% for Q2, compared to earlier estimates of 3.3% and 3.0%.

Fed projections still point to another half-point in cuts by year-end, though seven out of 19 policymakers expect fewer reductions. Analysts at Vital Knowledge warned the implications are “hawkish,” adding pressure on stocks.

The focus now shifts to Friday’s release of the Fed’s preferred inflation gauge, the core PCE index.

Government Shutdown Risks

Markets are also uneasy about a potential government shutdown. Lawmakers remain deadlocked over a funding bill, with the White House budget office instructing agencies to prepare for possible layoffs if no deal is reached.

Earnings in Focus

Accenture (NYSE: ACN) beat Q4 revenue forecasts and announced an $865 million restructuring to adapt to rising demand for digital and AI services.

Jabil Circuit (NYSE: JBL) also topped earnings estimates. However, both stocks slipped as overall market weakness dragged them lower.

Meanwhile, Intel (NASDAQ: INTC) shares rose after reports that the company approached Apple (NASDAQ: AAPL) about a potential investment.

Oil Prices Retreat

Crude oil fell Thursday, pulling back from a seven-week high. At 09:35 ET:

  • Brent futures fell 0.7% to $68.81 a barrel.
  • WTI futures declined 0.8% to $64.47 a barrel.

Both benchmarks had gained 2.5% on Wednesday after a surprise drop in U.S. crude inventories and renewed concerns over Ukraine’s attacks on Russia’s energy infrastructure.

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