U.S. Stocks Largely Offsetting Yesterday’s Post-Fed Rally

Stocks have moved sharply lower in morning trading on Thursday, giving back ground following the rally seen late in the previous session. The tech-heavy Nasdaq has shown a particularly steep drop, more than offsetting yesterday’s strong gain.

The major averages have seen further downside in recent trading, falling to new lows for the session. While the Nasdaq is down 548.06 points or 4.2 percent at 12,416.80, the S&P 500 is down 119.59 points or 2.8 percent at 4,180.58 and the Dow is down 704.49 points or 2.1 percent at 33,356.57.

The sell-off on Wall Street comes as traders cash in on the relief rally seen following the Federal Reserve’s monetary policy announcement on Wednesday.

The Federal Reserve raised interest rates by 50 basis points as widely expected, although Fed Chair Jerome Powell was less hawkish than some had feared.

During his post-meeting press conference, Powell said the Fed is not “actively considering” a 75 basis point rate hike, temporarily offsetting worries about the outlook for rates.

However, concerns about higher rates, inflation, the economic outlook and the ongoing war in Ukraine remain, contributing to the sharp pullback on Wall Street.

Traders are also looking ahead to the release of the Labor Department’s closely watched monthly jobs report on Friday.

Economists currently expect employment to jump by 391,000 jobs in April after surging by 431,000 jobs in March, while the unemployment rate is expected to edge down to 3.5 percent from 3.6 percent.

With the monthly jobs report looming, the Labor Department released a report this morning showing a modest increase in first-time claims for U.S. unemployment benefits in the week ended April 30th.

The report showed initial jobless claims rose to 200,000, an increase of 19,000 from the previous week’s revised level of 181,000.

Economists had expected jobless claims to inch up to 182,000 from the 180,000 originally reported for the previous week.

A separate report from the Labor Department showed a substantial pullback in labor productivity in the first quarter of 2022.

The Labor Department said labor productivity plunged by 7.5 percent in the first quarter, reflecting the largest decline since the third quarter of 1947.

Retail stocks are turning in some of the market’s worst performances on the day, dragging the Dow Jones U.S. Retail Index down by 4.5 percent to its lowest intraday level in well over a year.

Online home goods retailer Wayfair (W) is showing a particularly steep drop after reporting a wider than expected first quarter loss.

Substantial weakness is also visible among semiconductor stocks, as reflected by the 4.2 percent nosedive by the Philadelphia Semiconductor Index.

Steel stocks have also moved sharply lower in morning trading, resulting in a 4 percent slump by the NYSE Arca Steel Index.

Airline, housing and computer hardware stocks are also seeing considerable weakness, moving notably lower along with most of the other major sectors.

In overseas trading, stock markets across the Asia-Pacific region turned in a mixed performance on Thursday, with the markets in Japan and South Korea closed for holidays. China’s Shanghai Composite Index advanced by 0.7 percent, while Hong Kong’s Hang Seng Index fell by 0.4 percent.

Meanwhile, the major European markets have pulled back well off their best levels of the day but currently remain positive. While the U.K.’s FTSE 100 Index is up by 1.0 percent, the German DAX Index is up by 0.4 percent and the French CAC 40 Index is up by 0.3 percent.

In the bond market, treasuries have pulled back sharply after showing a strong move to the upside going into the close on Wednesday. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, is up by 12.5 basis points at 3.042 percent.

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