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Stock Market Today – Thursday, July 28: What You Need to Know

Story Highlights

Stocks rallied on Thursday despite GDP declining for the second consecutive quarter, which many investors define as a recession. As a result, investors are fleeing into the safety of bonds as Treasury yields fall. In addition, initial jobless claims come in higher than expected, while prices at the pump continue to fall.

Stocks Finish Thursday’s Trading Session in the Green

Last Updated 4:15 PM EST

Stock indices finished today’s trading session in the green despite two consecutive quarters of declining GDP. The Dow Jones Industrial Average, the S&P 500, and the Nasdaq 100 increased 1.03%, 1.21%, and 0.92%, respectively.

The communications sector (XLC) was the session’s laggard, as it fell by 1.12%. Conversely, the real estate sector (XLRE) was the session’s leader, with a gain of 3.71%. In addition, WTI crude oil decreased 1%, as it hovers just above $97 per barrel.

Furthermore, the U.S. 10-Year Treasury yield decreased to 2.67%, while the Two-Year Treasury yield also fell, as it hovers around 2.87%. This brings the spread between them to -20 basis points. The negative spread indicates that investors are still worried about the macroeconomic conditions, as a slowdown will likely occur moving forward.

As a result of Powell’s comments yesterday, along with today’s GDP results, the market is pricing in a higher chance of a lower Fed Funds rate for the end of the year when compared to yesterday.

In fact, the market’s expectations for a rate in the range of 3% to 3.25% increased to 42%, which is up from yesterday’s expectations of 28.6%. In addition, the market is now also assigning a 46.2% probability to a range of 3.25% to 3.5%. For reference, investors had assigned a 44.2% chance yesterday and a 36.5% likelihood a week ago.

Prices at the Pump Continue to Decline

Last Updated 3:15PM EST

Stock indices are in the green heading into the final 45 minutes of today’s trading session. As of 3:15 p.m. EST, the Dow Jones Industrial Average, the S&P 500, and the Nasdaq 100 are down 1.1%, 1.2%, and 0.9%, respectively.

WTI crude oil is currently hovering around $97 per barrel, as it trades not too far away from its session low of $96.06 per barrel. The price has pulled back considerably from last week’s high of $104.44 per barrel.

Consumers will be happy to see that the commodity’s continued downtrend has led to lower gas prices across the country. The national average for regular gas was last $4.278 per gallon, down from yesterday’s reading of $4.302. This is significantly lower than the all-time high of $5.016 per gallon on June 14.

The highest price can be found in California, where prices are substantially higher than the national average, at $5.661 per gallon. On the other hand, Texas is the state with the lowest gas price, at $3.782 per gallon.

It’s likely that this downward trend will continue going forward as the Federal Reserve looks to raise interest rates to fight inflation. However, higher rates will destroy demand throughout the whole economy.

Initial Jobless Claims Come in Higher than Expected

Last Updated 12:20PM EST

Stock indices are in the green halfway into today’s trading session. As of 12:20 p.m. EST, the Dow Jones Industrial Average, the S&P 500, and the Nasdaq 100 are up 0.6%, 0.5%, and 0.1%, respectively.

On Thursday, the Department of Labor released its Initial Jobless Claims report, which came in worse than expected. In the past week, 256,000 people filed for unemployment insurance for the first time. Expectations were for 253,000 individuals.

When using the four-week average, initial jobless claims were 249,250, up from last week’s reading of 243,000. It’s worth noting that this figure has been steadily trending upwards each week since the start of April 2022.

However, Continuing Jobless Claims, which measures the number of unemployed people who qualify for unemployment insurance, came in at 1.359 million, better than the forecast of 1.380 million and lower than last week’s 1.384 million.

Continuing Jobless Claims are in an overall downtrend and are currently sitting near their lowest levels since 1970. This suggests that more individuals are finding work than those who are filing for the first time.

However, this figure has been trending slightly upwards since the beginning of June. It will be interesting to see if this trend continues as interest rates rise while economic growth continues to slow down.

Stocks are in the Red as GDP Declines for Second Consecutive Quarter

Last Updated 10:00AM EST

Stock indices are in the red 30 minutes into today’s trading session. As of 10:00 a.m. EST, the Dow Jones Industrial Average, the S&P 500, and the Nasdaq 100 are down 0.4%, 0.4%, and 0.8%, respectively. This is the result of U.S. GDP shrinking for the second consecutive quarter, which many investors define as a recession.

The decline can be attributed to a few factors. The first is lower spending from consumers who have been impacted by higher inflation. Consumer sentiment decreased as purchasing power fell. In addition, higher interest rates have made the cost of borrowing higher, making it more difficult for people to purchase real estate. Furthermore, businesses reduced their investments as they look to lower their inventory levels.

As a result, bond yields plummeted as investors appear to be fleeing into the safety of bonds among fears of a further economic slowdown. The U.S. 10-Year Treasury yield is now hovering around 2.66%, a decrease of more than 11 basis points from the previous close.

Similar movements can be seen with the Two-Year yield, which is now at 2.88%. The spread between the 10-Year and Two-Year U.S. Treasury yields is still negative, as it currently sits at -22 basis points.

Pre-Market Update

U.S. equity futures fell early on Thursday as investors digested another 75 basis point interest rate hike by the Federal Reserve, as well as quarterly results from a few major companies.

Futures on the Dow Jones Industrial Average (DJIA) lost0.17%, while those on the S&P 500 (SPX) moved 0.25% lower, as of  7.55 a.m. EST, Thursday. Meanwhile, the Nasdaq 100 (NDX) futures retracted by 0.62%.

The pre-market trading session saw a 5.9% drop in the shares of Meta Platforms (META) on dismal quarterly results. Moreover, shares of healthcare company Teladoc (TDOC) plunged more than 26% in early morning trading on news of a $3 billion goodwill impairment charge. However, Ford’s (F) top and bottom line beats and dividend hike garnered 5% gains for the stock.

More major earnings are expected on Thursday, including those from Amazon (AMZN), Apple (AAPL), Intel (INTC), and Comcast (CMCSA).

The Fed’s Updates Buoys Confidence

However, the main highlight of Wednesday was the Fed’s monetary policy decision, which was to pull its benchmark interest rate to a range of 2.25%-2.50%. Fed Chair Jerome Powell was encouraged by how the job market has held up amid the increasing inflation and demand slowdown.

The central bank has also managed to shrink its balance sheet by $16 billion since June. Powell also mentioned that the aggressiveness of the September meeting will depend on the economic data and progress.

Interestingly, investors took the update to their stride, with the S&P 500, the Dow, and the Nasdaq 100 rising 2.62%, 1.37%, and 4.26%, respectively, at the end of the regular trading session Wednesday. This surge comes as a surprise as investors had been deeply concerned about the aggressive hikes pushing the economy into a recession.

However, Powell’s optimistic commentary on the economy buoyed market confidence. The Chairman assured that he doesn’t believe the economy to be in a recession, as there are many economic aspects that are performing well, which is not typical for an economy in a recession. Further, he said that he believes that a temporary speedbreaker to economic growth is essential to “create some slack.”

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