US stocks dipped on Thursday as a jump in the prior session cooled, while investors eyed the most recent corporate earnings and gauged economic data to determine the path of Federal Reserve rate cuts.
A benign reading on inflation calmed fears about a renewal in price pressures and strong bank earnings helped the three major U.S. indexes notch their biggest one-day percentage gain since Nov. 6 on Wednesday.
But stocks swayed between modest gains and losses on Thursday after economic data on Thursday indicated consumer spending remains strong, while the labor market is also on solid footing, giving the Fed room to maintain a slow pace in cutting interest rates this year.
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“The market breathed a pretty good sigh of relief yesterday. Now January’s undecided, but at least on a little bit better footing to see where we end up, and we can look at some more data and some earnings and see how that’s all going to turn out,” said Rick Pitcairn, chief global strategist at Philadelphia-based Pitcairn.
“The bank earnings have been strong, and those are bellwether earnings, and to the extent that you’ve got a steepening yield curve, you’ve got some strong earnings come out of the banks, they’re looking forward and not talking their numbers down. The market’s taken a little courage from that.”
Morgan Stanley advanced 4.03% after the lender said earnings increased in the fourth quarter, propelled by a wave of dealmaking, while Bank of America shares declined 0.98%. The country’s second-largest bank predicted higher interest income in 2025.
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The Dow Jones Industrial Average fell 68.42 points, or 0.16%, to 43,153.13, the S&P 500 lost 12.57 points, or 0.21%, to 5,937.34 and the Nasdaq Composite lost 172.94 points, or 0.89%, to 19,338.29.
Investors also focused on comments from Fed Governor Christopher Waller, who said the central bank could cut rates sooner and faster than expected as inflation is likely to continue to ease, which helped push Treasury yields lower.
The yield on the 10-year Treasury note was last down 3.8 basis points (bps) to 4.615% and rate futures were pricing in a greater chance for the Fed to cut rates by at least 25 bps at the central bank’s May meeting.
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