By
Steve Muchoki
April 16th, 2024
The slump in the Nasdaq Composite was fueled by some key stocks that recorded significant losses on Thursday.
The United States stock market clawed back its gains on Thursday with major indices, led by the tech-heavy Nasdaq Composite (INDEXNASDAQ: .IXIC) closed in the red. The Nasdaq Composite plunged by 1.78% to 11,855.83 while the Dow Jones Industrial Average (INDEXDJX: .DJI) shed off 431.20 points atop a 1.26% slip to 33,696.85. The broad market benchmark, S&P 500 Index (INDEXSP: .INX) dropped 1.38% to 4,090.41.
The market was riled again as the clamor for new interest rate hikes was echoed by the Federal Reserve Presidents of St Louis and Cleveland, James Bullard, and Loretta Mester. Both Fed leaders are in support of hiking the previous interest rate by 50 basis points as they believe the fight against inflation is not yet won.
“I was an advocate for a 50-basis-point hike and I argued that we should get to the level of rates the committee viewed as sufficiently restrictive as soon as we could,” Bullard said during a speech in Tennessee, according to Reuters.
While the worries about inflation are still multifaceted, Bullard said he sees the trend moving toward disinflation. Though he isn’t anticipating a slip back to the Fed’s target of 2-4%, he is still optimistic about a significant drop from the current level of 6.4%.
“In part due to front-loaded Fed policy during 2022, market-based measures of inflation expectations are now relatively low,” Bullard said, adding that “Continued policy rate increases can help lock in a disinflationary trend during 2023, even with ongoing growth and strong labor markets, by keeping inflation expectations low.”
The market was quite relieved that the Fed turned Dovish per its approach to rate hikes and this proposed new stance has got the market pricing in.
Major Stock Movers on the Nasdaq Composite
The slump in the Nasdaq Composite was fueled by some key stocks that recorded significant losses on Thursday. American multinational tech giant, Microsoft Corporation (NASDAQ: MSFT) led the losses with a 2.66% slump to close the trading session at $262.15 per share. Walt Disney Co (NYSE: DIS) was also a significant stock whose 3.12% drop came and weighed in on the broader stock market.
The January Consumer Price Index (CPI) was pegged at 6.4% compared to the year-ago period. Jobless claims also dropped compared to general expectations from analysts.
“Both inflation readings this week point to the stickiness of inflation and that the fight isn’t over, especially when considering today’s PPI reading was the highest month-over-month increase since early summer,” said Mike Loewengart, head of model portfolio construction at Morgan Stanley.
With the earnings season still underway, investors and the broader market observer will be keen to see how the inflation in the US is pricing in these key segments of the economy.