The S&P 500 Index sank 0.4pc as of 12:31pm in New York, led by the consumer staples and consumer discretionary sectors.
Shares of Walmart, the world’s largest retailer, dropped after profits fell short of expectations for the first time in three years.
The Nasdaq 100 Index declined 0.6pc. The blue chip Dow Jones Industrial Index retreated 0.4pc.
Applications for US unemployment benefits rose to their highest since June. At the same time, US manufacturing expanded at the fastest rate in three years and existing home sales rose. Yields on two-year Treasuries, the maturity most sensitive to expectations for Fed policy, rose.
“The economic numbers in the US were all over the map this morning,” said Vital Knowledge founder Adam Crisafulli, who said the net effect was to “shift Fed expectations in a slightly hawkish direction”.
Megacap tech stocks have sparked a rout in key indexes over the last several days, causing the S&P 500 to shed around $660bn (€568bn) in value over that span. Still, traders are waiting for a speech today by Chair Jerome Powell for a clearer sense of whether the central bank will cut rates as soon as next month.
“I think it’s OK that the market is taking a little bit of a breather, especially as it’s waiting to get some really important data from the Fed,” said Victoria Fernandez, chief market strategist at Crossmark Global Investments.
To be sure, Goldman Sachs Group’s trading desk said the losses in high-flying momentum stocks may present a dip-buying opportunity.
Roughly 65pc of S&P 500 constituents are holding above their 200-day moving averages, which is “still bullish”, according to LPL Financial chief technical strategist Adam Turnquist. But “it is not commensurate with breadth readings when the market is in record high territory”.
Amid the selloff and cooling labour market, investors are monitoring the Fed retreat in Jackson Hole, Wyoming, where Powell will speak. Although there are signs the labour market is softening, inflation readings have come in elevated.
“Markets are overly confident in their expectations” for rate cuts by the Fed in September because the data ahead of the symposium “are not clear on the need for an immediate cut”, Stefano Pascale, a Barclays Capital global equity derivatives strategist, wrote. He warned investors to be on the lookout for the “Jackson Hawk”.
Ahead of Powell’s speech, Kansas City Fed president Jeff Schmid said “modestly restrictive” rates at the moment have the Fed “on a good path.”
Meanwhile, Atlanta Fed president Raphael Bostic said he sees one rate cut this year, and Cleveland Fed president Beth Hammack said she wouldn’t support a cut if the decision was tomorrow.
(Bloomberg)
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