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15/03/24 Briefing

Wall Street closed lower on Thursday, dragged down by real estate and utility stocks. Investors’ mood was dampened by a slew of economic data released throughout the day that fell short of expectations. All the three major stock indexes ended in the red.

How Did the Benchmarks Perform?

The Dow Jones Industrial Average (DJI) fell 137.66 points, or 0.4%, to close at 38,905.66. Twenty-three components of the 30-stock index ended in negative territory, while seven ended in positive.

The tech-heavy Nasdaq Composite lost 49.24 points, or 0.3%, to close at 16,128.53.

The S&P 500 slid 14.83 points, or 0.3%, to close at 5,150.48. Nine of the 11 broad sectors of the benchmark index closed in the red. The Real Estate Select Sector SPDR (XLRE), the Utilities Select Sector SPDR (XLU) and the Financials Select Sector SPDR (XLF) declined 1.4%, 0.8% and 0.8%, respectively, while the Energy Select Sector SPDR (XLE) advanced 1%.

The fear-gauge CBOE Volatility Index (VIX) increased 4.7% to 14.40. A total of 13.1 billion shares were traded on Thursday, higher than the last 20-session average of 12.1 billion. Decliners outnumbered advancers by a 3.77-to-1 ratio on the NYSE. On the Nasdaq, declining issues outnumbered advancing ones by a 3.08-to-1 ratio.

PPI Numbers Come in Much Hotter Than Expected

Since the release of the consumer-side inflation numbers, which came in line with expectations, investors have been keeping a close watch on the Producer Price Index (PPI) numbers from February to gauge the reaction of the Fed.

On Thursday, the U.S. Bureau of Labor Statistics reported that PPI for final demand rose 0.6% in February, almost double of what was expected. PPI for January remained unrevised at an increase of 0.3%. On a year-over-year basis, PPI rose 1.6%, the most since moving up 1.8% for the 12 months ended September 2023.

Core PPI, which excludes food, energy and trade services, increased 0.4% in February after rising 0.6% in January. Year over year, core PPI moved up 2.8%.

The producer-side inflation numbers, which came in hotter than expected, weighed down on the markets. While even before this month’s inflation numbers were released, it was expected that there would be no rate cuts by the Fed, post the release, the market has cut down on the odds of a June rate cut to 62.9%, per the CME's FedWatch Tool. The same number was at a high of 81.7% a week ago.

Mega-cap growth stocks, like those from the tech sector, usually seem overvalued if an economy faces the risk of a gradual slowdown. While talks of a recession are currently on the back burner, with no clear signals from the Fed as to when the first rate-cut might be announced, the market remains volatile. Utilities and Real estate were the hardest hit sectors on the day.

Consequently, shares of American Electric Power Company, Inc. AEP and Brookfield Corporation BN lost 1.4% and 2.2%, respectively.

Economic Data

The Labor Department said on Thursday that initial jobless claims fell to 209,000, decreasing 1,000 for the week ending Mar 9. The previous week's level was revised down by 7,000 from 217,000 to 210,000. The four-week moving average decreased to 208,000, marking a fall of 500 from the previous week. The prior week's average was revised down by 3,750 to 208,500.

Continuing claims came in at 1,811,000 for the week ending Mar 2, increasing 17,000 from the previous week’s revised level. The previous week's level was revised down by 112,000 from 1,906,000 to 1,794,000. The four-week moving average was 1,799,250, an increase of 2,000 from the previous week's revised average. Last week's average was revised down by 91,000 from 1,888,250 to 1,797,250.

The U.S. Census Bureau reported that retail sales for February had increased by 0.6% compared with the consensus of 1% for the period. The number for January was revised down to a decrease of 1.1% from the previously reported decrease of 0.8%.

The U.S. Census Bureau also reported that business inventories for January came in virtually unchanged, while the December figure was revised down to a 0.3% increase against the previously reported 0.4%.

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