Worries About Interest Rate Outlook Continue To Weigh On Wall Street

(RTTNews) - Stocks have moved mostly lower in morning trading on Thursday, extending the sell-off seen late in the previous session. The major averages have all moved to the downside, with the Nasdaq and the S&P 500 falling to their lowest levels in a month.

Currently, the major averages are off their lows of the session but still in negative territory. The Nasdaq is down 123.06 points or 0.9 percent at 13,346.07, the S&P 500 is down 34.13 points or 0.8 percent at 4,368.07 and the Dow is down 101.01 points or 0.3 percent at 34,339.87.

Concerns about the outlook for interest rates continue to weigh on Wall Street following the Federal Reserve's monetary policy announcement on Wednesday.

While the Fed left interest rates unchanged as widely expected, the central bank forecast another rate hike before the end of the year as well as keeping rates at elevated levels for longer than previously anticipated.

"12 of 19 governors at this point currently favor one more interest rate increase in the next two meetings before the end of the year," said Alex McGrath, Chief Investment officer for NorthEnd Private Wealth. "Additionally the dot plot for rate expectations in 2024 was higher than it had been in previous meetings signaling a hawkish outlook for rates next year, cementing their higher for longer stance."

He added, "Heading into the fourth quarter with rate expectations remaining elevated, we are more than likely in for a choppy end of the year as the markets digest an outlook less favorable for the growth assets that have driven the market for 2023."

The worries about interest rates have contributed to a surge by treasury yields, with the yield on the benchmark ten-year note jumping to its highest level in almost sixteen years.

Adding to the concerns about interest rates, the Labor Department released a report this morning showing first-time claims for U.S. unemployment benefits unexpectedly fell to a seven-month low in the week ended September 16th.

The report said initial jobless claims dipped to 201,000, a decrease of 20,000 from the previous week's revised level of 221,000.

Economists had expected jobless claims to inch up to 225,000 from the 220,000 originally reported for the previous week.

With the unexpected decrease, jobless claims fell to their lowest level since hitting 199,000 in the week ended January 28th.

However, Nancy Vanden Houten, Lead US Economist at Oxford Economics, said, "The claims data don't change our call for the Fed to keep rates steady before embarking on a very gradual pace of rate cuts in mid-2024."

"A sharp rise in unemployment and claims isn't a prerequisite for the Fed to stop raising rates," she added. "Fed Chair Powell yesterday noted that the labor market is coming into better balance without a rise in the unemployment rate."

Sector News

Housing stocks have moved sharply lower following the release of a report unexpectedly showing a continued decrease in existing home sales, with the Philadelphia Housing Sector Index plunging by 2.7 percent to a six-month intraday low.

The National Association of Realtors said existing home sales fell by 0.7 percent to an annual rate of 4.04 million in August after tumbling by 2.2 percent to an annual rate of 4.07 million in July. Economists had expected existing home sales to rise to a rate of 4.10 million.

Significant weakness has also emerged among brokerage stocks, as reflected by the 2.0 percent slump by the NYSE Arca Broker/Dealer Index. The index has tumbled to its lowest intraday level in a month.

Steel stocks are also seeing considerable weakness in morning trading, dragging the NYSE Arca Steel Index down by 1.9 percent.

Networking, gold and retail stocks have also shown notable moves to the downside, reflecting broad based weakness on Wall Street

Other Markets

In overseas trading, stock markets across the Asia-Pacific region moved mostly lower during trading on Thursday. Japan's Nikkei 225 Index dove by 1.4 percent, while China's Shanghai Composite Index slid by 0.8 percent.

The major European markets have climbed off their worst levels but continue to see significant weakness. While the French CAC 40 Index has tumbled by 1.3 percent, the German DAX Index is down by 1.1 percent and the U.K.'s FTSE 100 Index is down by 0.2 percent.

In the bond market, treasuries have moved sharply lower amid concerns about the outlook for interest rates. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, is up by 11.9 basis points at 4.468 percent.