NEW YORK (AP) — Stock are slipping again on Wednesday as Wall Street’s slow start to 2024 carries into a second day.
The S&P 500 was 0.6% lower in afternoon trading, though still within 2% of its record set exactly two years ago. The Dow Jones Industrial Average was down 224 points, or 0.6%, as of 12:31 p.m. Eastern time, and the Nasdaq composite was 0.9% lower.
Some of last year’s biggest winners were again giving up some of their gains. Tesla fell 3.3% after soaring nearly 102% last year, for example. It and the other six “Magnificent 7” Big Tech stocks responsible for the majority of Wall Street’s returns last year have regressed some following their tremendous runs.
The question hanging over the market is whether all the enthusiasm that helped stocks broadly rally for nine straight weeks into the start of this year was warranted. It was built on expectations that inflation has cooled enough for the Federal Reserve to not only halt its hikes to interest rates but to cut them several times this year. Hopes are also high that the economy can escape a recession, even after the Fed hiked its main interest rate to the highest level since 2001.
A couple of reports released Wednesday morning indicated the overall economy may indeed be slowing from its strong growth last summer, which the Federal Reserve hopes will keep a lid on inflation. The danger is if it slows too much and begins shrinking.
One report showed that U.S. employers were advertising nearly 8.8 million job openings at the end of November, down slightly from the month before and the lowest number since early 2021. The report also showed that slightly fewer workers quit their jobs during November.
The Fed is looking for exactly such a cooldown, which it hopes will limit upward pressure on inflation without necessitating widespread layoffs across the economy.
“These data will be welcome news for policymakers and support the Fed’s view that the next move in rates will be lower,” likely in the spring, said Rubeela Farooqi, chief U.S. economist at High Frequency Economics.
A second report from the Institute for Supply Management showed that the U.S. manufacturing industry is improving by a touch more than economists expected, but it’s still contracting. Manufacturing has been one of the hardest-hit areas of the economy recently, while the job market and spending by U.S. households have remained resilient.
Treasury yields slumped immediately after the reports but quickly recovered. The yield on the 10-year Treasury held at 3.94% from late Tuesday. That increases the pressure on the stock market, though it’s still well below the 5% that it reached in October.
In the afternoon may come the day’s headline report, when the Federal Reserve will release the minutes from its latest policy meeting. It was at that meeting in December that policy makers hinted their dramatic campaign to hike interest rates to get inflation under control may be over. They also released projections showing their median official expects the federal funds rate to fall by 0.75 percentage points through 2024.
That sparked a big rally on Wall Street and bets that the Fed will cut rates by even more. Traders betting on a relatively high probability for at least 1.50 percentage points in total cuts, according to data from CME Group. The federal funds rate is currently sitting within a range of 5.25% to 5.50%.
Even if the Federal Reserve is able to pull off its perfect landing for the economy to shimmy away from high inflation, some critics still say the stock market has run too far, too fast in recent months and is due for at least a pause in its run.
In stock markets abroad, indexes fell across much of Europe and Asia. Losses were particularly sharp in France, where the CAC 40 fell 1.6%, and in South Korea, where the Kospi sank 2.3%. Stocks in Shanghai were an outlier, rising 0.2%.
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