Wall Street indexes finish lower, data raises uncertainty for rate-cut outlook

NEW YORK – US stocks ended moderately lower on Thursday, with most S&P 500 sectors down as economic data increased uncertainty over the outlook for interest rate cuts from the Federal Reserve.

Data showed initial jobless claims dropped 14,000 to a seasonally adjusted 218,000 for the week ended September 20. Other data showed the US economy grew faster than previously estimated in the second quarter amid strong consumer spending and business investment.

Also, Chicago Fed President Austan Goolsbee said on Thursday he was uneasy with cutting rates too quickly, with inflation a risk.

The comments and data follow the US central bank’s move last week to lower rates by 25 basis points – its first cut since December – after signs of weakness in the labor market. It also gave indications of more rate cuts ahead. Investor expectations of another 25 bps cut in the Fed’s October meeting are now at 83.4%, down from about 92% on Wednesday, according to the CME FedWatch Tool.

“The economic data that’s come out over the last day or two is kind of confusing in that, in my mind, it calls into question” how much the Fed may cut rates again and whether the Fed needs to cut rates again this year, said Peter Tuz, president of Chase Investment Counsel in Charlottesville, Virginia.

Investors are bracing for Friday’s release of the Personal Consumption Expenditures price index, the Fed’s preferred inflation measure.

Most of the S&P 500 sectors ended lower, but energy gained 0.9% and technology eked out a 0.03% increase as shares of Intel jumped 8.9%. The Wall Street Journal reported, citing people familiar with the matter, that Intel has approached Taiwan Semiconductor Manufacturing Company 2330.TW about investments in manufacturing or partnerships.

The Dow Jones Industrial Average fell 173.96 points, or 0.38%, to 45,947.32, the S&P 500 lost 33.25 points, or 0.50%, to 6,604.72, and the Nasdaq Composite lost 113.16 points, or 0.50%, to 22,384.70.

Among decliners, CarMax shares fell 20.1% after the used-car retailer reported lower second-quarter profit.

In addition, shares of Accenture were down 2.7% even after the consulting firm reported revenue above expectations.

Investors are eager to hear soon from more companies on their quarterly results, especially with valuations considered high after the market’s run of record highs recently.

“Historically, we’re certainly at the high end” of valuations, said Rick Meckler, partner at Cherry Lane Investments, a family investment office in New Vernon, New Jersey. “One big positive is it seems like the government is going to let big tech get bigger.”

Next week brings the all-important monthly US jobs report.

Monetary policymakers are not unanimous on the proper way forward with rates, with Stephen Miran, President Donald Trump’s recent Fed appointee, continuing to push for accelerated policy easing.

Earlier this week, Fed Chair Jerome Powell reiterated that the US central bank needs to balance inflation concerns with a weakening job market in its coming interest rate decisions.

Declining issues outnumbered advancers by a 3.11-to-1 ratio on the NYSE. There were 110 new highs and 109 new lows on the NYSE.

On the Nasdaq, 1,166 stocks rose and 3,502 fell as declining issues outnumbered advancers by a 3-to-1 ratio. Volume on US exchanges was 19.58 billion shares, compared with the 17.99 billion average for the full session over the last 20 trading days.

(Additional reporting by Niket Nishant, Sukriti Gupta, and Purvi Agarwal in Bengaluru; Editing by Shilpi Majumdar and Aurora Ellis)