US stocks have ended lower as investors shifted gears after considering the possibility that the US Federal Reserve may take longer to start cutting interest rates.

Traders are keeping a close eye on speeches by Fed officials this week, including Chair Jerome Powell on Tuesday, for any change in the central bank’s rhetoric after data last week showed services activity was strong in January as well as strong job growth.

“We got that blowout jobs report, and people have had to reassess what the outlook for the Fed and the economy is. Tomorrow it will be interesting to see if Powell continues his transformation from hawk to dove,” said Brian Jacobsen, senior investment strategist at Allspring Global Investments.

US Treasury Secretary Janet Yellen said on Monday the United States may avoid a recession as inflation is coming down while the labour market remains strong.

After taking a hit in 2022, US equities have recovered strongly in 2023, led by megacap growth stocks amid short-lived hopes that the Fed will temper its aggressive rate hikes, which in turn could alleviate some pressure on equity valuations.

Money market participants now see the benchmark rate peaking at 5.1 per cent by July, in line with what most policymakers have backed repeatedly.

Yield on the 10-year US Treasury note extended gains to a four-week high.

On the corporate side, analysts expect quarterly earnings of S&P 500 firms to decline 2.8 per cent in the fourth quarter, according to Refinitiv.

The Dow Jones Industrial Average ended down 35.85 points, or 0.11 per cent, at 33,890.16, the S&P 500 lost 25.44 points, or 0.62 per cent, to 4,111.04 and the Nasdaq Composite dropped 119.51 points, or 1 per cent, to 11,887.45.

Volume on US exchanges was 11.17 billion shares, compared with the 11.858 billion average for the full session over the last 20 trading days.

Tyson Foods Inc fell 4.6 per cent after missing analysts’ estimates for quarterly revenue and profit.

Miner Newmont Corp slid 4.5 per cent on its $US16.9 billion ($A24.6 billion) offer for Australian peer Newcrest Mining Ltd to build a global gold behemoth.

Contrary to the overall trend, Tesla Inc rose 2.5 per cent after a US jury on Friday found Chief Executive Elon Musk and his company were not liable for misleading investors when Musk tweeted in 2018 that he had “funding secured” to take the electric-vehicle maker private.

Meme stocks, such as AMC Entertainment and Gamestop , also gained steam late in the session, ending 11.8 per cent and 7.2 per cent higher, respectively.

US-listed Chinese stocks such as Pinduoduo Inc fell 1.9 per cent on geopolitical concerns after a US military fighter jet shot down a suspected Chinese spy balloon off the coast of South Carolina on Saturday.

Most of the 11 major S&P 500 sector indexes were in the red, except for utilities and consumer staples.

Declining issues outnumbered advancing ones on the NYSE by a 3.37-to-1 ratio; on Nasdaq, a 1.98-to-1 ratio favoured decliners.

The S&P 500 posted 5 new 52-week highs and 1 new low; the Nasdaq Composite recorded 79 new highs and 19 new lows.

(Reuters) – Major U.S. stock indexes ended lower on Friday after surprisingly strong jobs data sparked concerns about aggressive Federal Reserve action, while investors digested a mixed bag of megacap company earnings reports.

The S&P 500 still posted a gain for the week, which included a string of major market events, and stood not far from five-month highs. The Nasdaq tallied its fifth straight weekly rise, its longest such streak since late 2021.

U.S. job growth accelerated sharply in January, with nonfarm payrolls surging by 517,000 jobs, well above an estimate of 185,000. The unemployment rate hit a more than 53-1/2-year low of 3.4%.

In another sign of economic strength, U.S. services industry activity rebounded strongly in January.

Investors have been balancing hopeful signs that the economy could avoid a feared recession against concerns about how long the Fed will keep interest rates high to rein in inflation. The S&P 500 gained earlier this week after comments that were more dovish than expected from Fed Chair Jerome Powell, who acknowledged progress in the fight against inflation.

The jobs report “was an incredible surprise and it raises a lot of questions about what the Fed is going to do next,” said Kristina Hooper, chief global market strategist at Invesco. “What I think is causing some of the volatility is markets trying to make sense of how the Fed will perceive this.”

The Dow Jones Industrial Average fell 127.93 points, or 0.38%, to 33,926.01, the S&P 500 lost 43.28 points, or 1.04%, to 4,136.48 and the Nasdaq Composite dropped 193.86 points, or 1.59%, to 12,006.96.

For the week, the S&P 500 rose 1.6%, the Dow slipped 0.15%, and the Nasdaq gained 3.3%.

Wall Street’s main indexes have had a solid start to the year as tech and other stocks that struggled in 2022 have rebounded, fueled by hopes that the Fed’s rate hikes would soon end and the economy might be able to navigate a soft landing.

“So many things were trading at bargain-basement prices three, four months ago,” said Eric Kuby, chief investment officer at North Star Investment Management Corp. “That has gone away… I think we are in a fair game now.”

On Friday, investors were also digesting another heavy batch of corporate results.

Shares of Apple, the largest U.S. company by market value, rose 2.4%. The company forecast that revenue would fall for a second quarter in a row but that iPhone sales were likely to improve as production had returned to normal in China.

Shares of Amazon slumped 8.4% as the company said operating profit could fall to zero in the current quarter as savings from layoffs do not make up for the financial impact of consumers and cloud customers clamping down on spending.

Alphabet shares dropped 2.7% after the Google parent posted fourth-quarter profit and sales short of Wall Street expectations.

In other corporate news, Ford Motor shares slid 7.6% after the automaker predicted a difficult year ahead.

Declining issues outnumbered advancing ones on the NYSE by a 2.82-to-1 ratio; on Nasdaq, a 1.66-to-1 ratio favored decliners.

The S&P 500 posted 16 new 52-week highs and one new low; the Nasdaq Composite recorded 127 new highs and 16 new lows.

About 12.8 billion shares changed hands in U.S. exchanges, compared with the 11.9 billion daily average over the last 20 sessions.

(Reporting by Lewis Krauskopf in New York, Shreyashi Sanyal and Johann M Cherian; Additional reporting by Shubham Batra; Editing by Sriraj Kalluvila, Maju Samuel and Cynthia Osterman)

NEW YORK: The Nasdaq and S&P 500 ended higher on Thursday and touched roughly five-month highs as a more dovish-than-expected message from Federal Reserve chair Jerome Powell boosted equities and Meta Platforms shares soared on rigorous cost controls.

The Dow slipped, dragged down by declines in some big healthcare stocks.

Investors were still digesting the Fed’s policy decision on Wednesday and comments from Powell, who acknowledged progress in the fight against inflation and appeared reluctant to push back against the rally in stocks and bonds.

“I think the reaction to yesterday’s Fed comments really encouraged investors to go risk on,” said Rick Meckler, partner at Cherry Lane Investments in New Vernon, New Jersey. “The bottom line for investors I think is that the Fed’s comments were unexpected.”

The Dow Jones Industrial Average fell 39.02 points, or 0.11%, to 34,053.94, the S&P 500 gained 60.55 points, or 1.47%, to 4,179.76 and the Nasdaq Composite added 384.50 points, or 3.25%, to 12,200.82.

Shares of megacap stocks Apple, Amazon and Google parent Alphabet also gained strongly ahead of results due after market close on Thursday, with Apple rising 3.7%, and Amazon and Alphabet both up over 7%.

In initial after-hours trading, however, shares of all three companies fell after their respective results.

After a bruising 2022, US stock markets have made a strong start to the year, with tech and other stocks that lagged last year leading the rebound amid hopes that the Fed will temper its aggressive rate hikes, which in turn could alleviate some pressure on equity valuations.

Those trends continued on Thursday. The communications services sector jumped 6.7%, its biggest daily gain in almost three years, led by a 23.3% surge for Facebook parent Meta. The company revealed stricter cost controls this year and a $40 billion share buyback, as CEO Mark Zuckerberg called 2023 the “year of efficiency.”

The S&P 500’s 50-day moving average moved above the 200-day moving average, a pattern known as a “golden cross” that is perceived by many as a bullish technical signal for near-term momentum.

The energy sector, one of last year’s standout performers, fell 2.5%, while healthcare dropped 0.7%.

UnitedHealth Group shares fell 5.3% after the U.S. government proposed Medicare Advantage reimbursement rates below analyst estimates, and the stock weighed down the Dow. A 3.3% decline in Merck shares, after the drugmaker forecast 2023 earnings below Wall Street estimates, also dragged on the blue chip index.

Shares of drugmaker Eli Lilly dropped 3.5% after sales of its closely watched diabetes drug missed estimates.

Data showed jobless claims fell last week to a nine-month low, highlighting the labor market’s resilience, ahead of monthly U.S. employment numbers on Friday.

Advancing issues outnumbered declining ones on the NYSE by a 2.29-to-1 ratio; on Nasdaq, a 2.55-to-1 ratio favored advancers.

The S&P 500 posted 36 new 52-week highs and one new low; the Nasdaq Composite recorded 162 new highs and 16 new lows.

About 15 billion shares changed hands in U.S. exchanges, compared with the 11.7 billion daily average over the last 20 sessions.— Reuter

U.S. stocks and bonds rallied on Wednesday, much to the chagrin of traders who had ramped up bearish bets on the expectation that Federal Reserve Chairman Jerome Powell would push back against the market’s latest advance.

Now, the question on most traders’ minds is: With Powell out of the way, do markets have the all-clear to keep on chugging?

It’s very possible, market strategists said, citing Powell’s remarks about financial conditions during Wednesday’s press conference, which followed the Fed’s decision to hike interest rates by another 25 basis points.

According to market strategists, the upshot is that instead of trying to corral or push back against markets, Powell has decided to disregard their latest moves, treating them as insignificant, or as further evidence that the Fed’s tactics to curb inflation are working without much blowback to the real economy or labor market.

During the opening minutes of the question-and-answer session segment of Wednesday’s press conference, Powell said financial conditions had tightened substantially and that the Fed was no longer concerned with short-term fluctuations.

U.S. stocks seemed to jerk higher in response, as market strategists said Powell seemed to be signaling that higher equity prices and lower bond yields are no longer a threat to the Fed’s inflation-fighting mission.Some even took issue with Powell’s underlying claim, arguing that according to at least one popular measure, financial conditions are little-changed from a year ago. Among them was Allianz’s Mohamed El-Erian, who sounded off in a tweet, saying “Not sure which index he is using. The most widely cited ones show overall financial conditions as loose as they were a year ago.”

Financial-conditions indexes are supposed to reflect the impact that fluctuations in markets and exchange rates are having on the real economy, according to Guy LeBas, chief fixed-income strategist at Janney, in a phone interview.

By not pushing back when asked, Powell has given equity and bond markets “tacit approval” to keep on rallying, LeBas said.

Others took a similar view.

“The fact that Powell thinks that financial conditions have tightened, when they have eased across a range of metrics in recent months, is dovish,” said Neil Dutta,  head of economics at Renaissance Macro Research, in a tweet.

Market participants had seemingly become “obsessed” with the notion that Powell and the rest of the FOMC would push back against looser financial conditions during the run-up to Wednesday’s meeting, LeBas said. This belief even helped rattle U.S. stocks in the days ahead of the Fed meeting, market strategists said.

Instead, Powell repudiated this notion, and rightfully so, according to LeBas, since the impact that market swings have on inflation is rarely so direct.

“Stable FCIs at a relatively high level…will also work to constrain activity. In that respect, we don’t believe Fed policymakers spend as much time today obsessing over FCIs as market participants seem to think,” LeBas said in a note to clients. That view turned out to be vindicated.

The Chicago Fed’s National Financial Conditions Index shows substantial easing since October. It currently stands at -0.35, compared with roughly -0.11 in mid-October. Higher equity prices and lower bond yields correspond with a lower number on the index. Bond yields move inversely to bond prices.

By comparison, the index was much lower before the Federal Reserve started hiking interest rates in March 2022. It stood at -0.60 on Dec. 31, 2021.

The S&P 500 SPX, +1.05% gained 42.61 points, or 1.1%, on Wednesday to finish at 4,119.21, its highest level since August. For the Nasdaq Composite COMP, +2.00%, it was the highest close since September. The yield on the 2-year Treasury note TMUBMUSD02Y, 4.104% fell by roughly 8 basis pints to 4.125%, while the yield on the 10-year note TMUBMUSD10Y, 3.412% fell by 10.4 basis points to 3.442%. U.S. stocks saw substantial gains in January, with the S&P 500 rising more than 6%, while some of the most speculative stocks saw even larger gains. The S&P 500 fell by 19.4% in 2022.

The U.S. Dollar Index DXY, -0.25%, a gauge of the buck’s strength vs. a basket of its main rivals, fell by 0.9% to 101.14.

Of course, this wasn’t always the case. For a while last year, it seemed that the Fed viewed rallies in markets as a direct affront. Wednesday’s reaction is a far cry from how markets responded to Powell’s fire-and-brimstone speech at Jackson Hole in August. Back then, Powell delivered a terse statement where he said the Fed would continue with its rate hikes despite the likelihood that U.S. businesses and households would suffer.

Many market commentators said his August remarks appeared calibrated to push back on a rally in stocks and bonds driven by premature hopes for a Fed pivot. If this was the case, then they had their desired effect: The S&P 500 fell to fresh lows a few weeks later.

Powell has a good reason for abandoning this strategy, according to LeBas.

“The impulse from financial conditions has already done its job,” he said.

With Powell out of the way, will stocks drift higher from here? It’s possible, market strategists said. But there are other factors that could trip them up.

Corporate earnings are one possible candidate. Profits are on track to fall by 2.4% in the fourth quarter compared with 2021, according to Refinitiv data.

However, S&P 500 stocks are still on track to outperform Wall Street’s relatively low expectations, according to Howard Silverblatt, senior index analyst at S&P Dow Jones Indices.