On Thursday, the major U.S. stock indexes witnessed significant declines, with the S&P 500 registering its most substantial daily percentage drop since February 13. This downturn occurred as Federal Reserve officials struck a cautious tone regarding the potential for interest rate cuts, while investors awaited the release of Friday’s U.S. monthly jobs report.
Remarks from Federal Reserve officials, notably Minneapolis Fed Bank President Neel Kashkari, hinted that the anticipated interest rate cuts might not materialize as swiftly as previously expected. Kashkari suggested that while he had initially projected two rate cuts for this year, none might be necessary if inflation remains subdued. Similarly, Richmond Fed President Thomas Barkin underscored the importance of gaining clarity on the inflationary landscape before contemplating rate adjustments, echoing sentiments expressed by other Fed policymakers, including U.S. central bank chief Jerome Powell.
In addition to Fed comments, investor sentiment was influenced by remarks from U.S. President Joe Biden, who advocated for an immediate ceasefire in discussions with Israeli Prime Minister Benjamin Netanyahu amid the ongoing conflict in Gaza. Geopolitical tensions stemming from this situation contributed to a surge in oil prices during the trading session.
All sectors within the S&P 500 experienced declines, with the technology sector leading the losses with a 1.7% drop, while shares related to defense, such as Lockheed Martin, saw gains.
The market exhibited nervousness ahead of Friday’s release of the jobs report, as evidenced by the Cboe Volatility index, which recorded its highest close since November 1. Initial optimism, driven by U.S. jobless claims data suggesting potential rate cuts, waned as investors grew apprehensive about the forthcoming report.
The Dow Jones Industrial Average fell by 530.16 points, or 1.35%, to 38,596.98, while the S&P 500 lost 64.28 points, or 1.23%, closing at 5,147.21. Similarly, the Nasdaq Composite dropped 228.38 points, or 1.4%, to reach 16,049.08.
Market participants eagerly awaited Friday’s jobs data for insights into the labor market and inflation trends. Economists anticipated a decline in nonfarm payrolls for March to 200,000 from February’s figure of 275,000, with the unemployment rate likely remaining stable at 3.9%.
Despite the prevailing uncertainty, money markets continued to project a near 60% chance of at least a 25 basis-point rate cut in June, according to the CME Group’s FedWatch tool.
Amidst the broader market decline, shares of Levi Strauss stood out with a notable 12.4% increase after the apparel maker raised its annual profit forecast, citing efficiencies gained from cost-cutting measures and reduced discounts.
Trading volume on U.S. exchanges was above average, with declining issues outnumbering advancing ones on both the NYSE and Nasdaq. The S&P 500 recorded 55 new 52-week highs and 6 new lows, while the Nasdaq Composite saw 108 new highs and 98 new lows.