US stocks dipped on Thursday, as lower commodity prices and jitters over the health of regional banks undercut optimism that the Federal Reserve is set to halt its campaign of interest rate rises.
Wall Street’s benchmark S&P 500 was down 0.3 per cent in mid-afternoon trading, on track to break a four-day winning streak.
Disney was the worst performer on the index after reporting a decline in subscribers to its streaming business. And energy stocks retreated as oil prices fell almost 2 per cent.
PacWest shares fell 22 per cent after the bank announced it lost almost a tenth of its deposits in the first week of May. The KBW regional banks index shed 1.9 per cent.
“With yet another regional bank taking emergency action in response to fleeing customers, worries about the fragility of the [ . . . ] sector show little sign of abating,” said Susannah Streeter, head of money and markets at Hargreaves Lansdown.
The moves came despite a pair of economic releases that provided further signs the Fed is making progress in reducing inflation. US initial jobless claims hit their highest level since October 2021, signalling softening in the labour market, which is expected to reduce pressure on wage growth. A separate report showed producer price inflation for April was slightly lower than expected.
The tech-heavy Nasdaq Composite, however, eked out a 0.1 per cent gain, thanks in part to a nearly 5 per cent rise in Google parent Alphabet’s stock after it unveiled an artificial intelligence-powered search engine at its annual developer conference.
Michael Metcalfe, head of Macro Strategy at State Street Global Markets, said: “There is a pull and push between micro factors, such as reported deposit falls in certain banks, set against macro hopes for a peak and eventually a fall in lower interest rates.”
Uncertainty over the US debt ceiling continues to cast a shadow over markets after US Treasury secretary Janet Yellen warned earlier this month that the government could run out of money as soon as June 1.
JPMorgan chief executive Jamie Dimon on Thursday cautioned that the debt-ceiling crisis could spark a “panic” in markets. His remarks came after former US president Donald Trump on Wednesday urged Republican lawmakers to let the government default on its debts unless Democrats capitulate to demands for “massive” spending cuts.
The dollar rose 0.6 per cent to $102.107 against a basket of six other currencies.
The yield on interest rate-sensitive two-year Treasuries was flat at 3.89 per cent, while the yield on 10-year notes was down 0.05 percentage points at 3.39 per cent. Bond yields fall when prices rise.
The souring sentiment spread to European markets, with the region-wide Stoxx 600 reversing its morning gains to end the day flat. Germany’s Dax fell 0.4 per cent, while France’s CAC 40 ended 0.3 per cent higher.
London’s FTSE 100 edged down 0.1 per cent after the Bank of England raised its benchmark rate for the 12th consecutive time, by 0.25 percentage points to 4.5 per cent, as had been anticipated by markets. Traders expect BoE rates to peak at 4.75 per cent in September.
The pound weakened against the dollar on the day of the announcement, to trade nearly 1 per cent lower at $1.25.
Asian equities struggled for direction after weak inflation data in China pointed to weakening demand, but traders hoped the similarly soft US data would support stock market valuations. Chinese consumer price inflation slowed to its weakest level in two years.
Hong Kong’s Hang Seng index and Japan’s Topix both shed 0.1 per cent. China’s CSI 300 finished 0.2 per cent lower.
Additional reporting by William Langley in Hong Kong
