Tech-Led Stock Rally Put on Pause After Mixed Data: Markets Wrap

(Bloomberg) — A rally that shot the world’s biggest technology stocks to a series of all-time highs lost steam Thursday while Treasuries resumed a decline as traders digested a slew of data ahead of next week’s Federal Reserve policy-setting meeting.

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The S&P 500 slid 0.1% while the Nasdaq 100 slipped 0.4% after higher-than-expected jobless claims and too hot producer price data. Both equity benchmarks had made strong gains in the prior session after an in-line US inflation report almost fully baked in a quarter-point interest rate cut at the Fed’s Dec. 18 meeting.

Shorter dated Treasury yields rose after hitting the day’s lows on data showing initial jobless claims rose to 242,000 for the week ended Dec. 7, ahead of economists’ estimates for 220,000. November producer price data released at the same time was mixed, with some measures exceeding estimates. The yield on the benchmark 10-year rose to 4.29%.

“With high egg prices appearing to play a key role in the hotter-than-expected headline PPI, traders may be focusing more on the jump in jobless claims,” according to Chris Larkin at E*Trade from Morgan Stanley. While there’s been a steady stream of solid labor data, “the Fed is primed to be sensitive to any signs of a softening jobs picture.”

With a third-consecutive cut from the US central bank widely expected, traders’ focus is turning to the Fed’s projections for next year. Still-elevated inflation pressures and the prospect of a pause in early-2025 have left investors on edge.

“We could get a bit of a hawkish cut this month from the Fed where they say ‘we’ll cut now but we’ll watch data’,” said Ella Hoxha, head of fixed income at Newton Investment Management. “In that setup, the risk is still that you price the Fed to be a bit more cautious rather than more dovish.”

In the EU, the European Central Bank met expectations for a quarter-point of interest-rate easing, setting the stage for a similar move by the Federal Reserve next week. The Swiss National Bank made a surprising 50 basis-point rate reduction.

The euro dropped against the dollar after the ECB cut. Earlier in the week, Canada lowered its policy rates by a half point, while Australia hinted it’s moving toward easings and China vowed to deliver rate cuts. Japan, meanwhile, signaled it’s in no hurry to hike rates.

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