Stocks fell Thursday, giving up sharp gains early in the session as concerns over the Federal Reserve and future monetary policy offset excitement around the latest batch of corporate earnings.
The Dow Jones Industrial Average lost 103 points, or 0.3%. The S&P 500 and Nasdaq Composite each lost about 0.3%. At session highs, the Dow advanced more than 300 points, while the S&P 500 and Nasdaq Composite were up 0.9% and 1.4%, respectively.
“Wall Street couldn’t keep the upbeat mood,” said Ed Moya, senior market analyst at Oanda. “Some traders placed bets that the Fed will have to do a lot more tightening than what Wall Street is pricing in.”
Investors recently have been monitoring the Fed’s commentary as they search for clues on future policy moves. The Fed earlier this month hiked rates by 25 basis points. On Tuesday, Fed Chair Jerome Powell said that inflation was cooling but there was still a long way to go.
At the same time, Wall Street is in the middle of earnings season, with investors watching for insight on how companies have fared amid high inflation and how how they expect to perform going forward. They appeared to be pleased with the latest batch of reports from household-name companies, sending the market up early in the day.
Disney shares gained 1.5% after initially popping as the company posted smaller-than-expected subscriber losses at its streaming service along with earnings and revenue that beat analyst estimates. CEO Bob Iger said Thursday on CNBC’s “Squawk on the Street” that he was only expecting to stay in the role for two years, while activist investor Nelson Peltz said he was ending a proxy battle after the company unveiled a restructuring plan that included 7,000 layoffs and a reorganization of its divisions.
PepsiCo advanced more than 1% on the back of fourth-quarter earnings that came in above Wall Street expectations. The stock traded well off its session highs, however.
But despite the latest beats, Wall Street has considered this earnings season lackluster. Nearly 70% of the approximately two-thirds of S&P 500 companies that have reported earnings so far have beaten analyst expectations, FactSet data shows. That beat rate is below a three-year average of 79%, according to data from The Earnings Scout.
PayPal, Lyft and Expedia will report after the market closes.
Unrelated to earnings, Google-parent Alphabet slid more than 5% as investors grew concerned around rising competition in the artificial intelligence space. On the other hand, Tesla rose more than 4% as it continued gaining back lost value.
The number of weekly jobless claims reported Thursday jumped 13,000 to 196,000, more than expected, and suggesting a possible cooling in the red-hot labor market. Treasury yields fell after the data as investors bet that maybe the job market would cool enough for the Fed to slow its hiking campaign further.