Investors are still waiting for a Santa rally
London (AFP) - A mini stocks rally triggered by positive US economic data faltered on Thursday, while the yen held onto gains against the dollar after surging earlier in the week.
Wall Street stocks fell at open of trading, with more positive economic data prompting concerns among investors about rate hikes by the US Federal Reserve.
The Dow was down 1.4 percent in late morning trading, while the broader S&P 500 shed 1.8 percent and tech-heavy Nasdaq Composite fell 2.6 percent.
“The momentum of the rally the stock market enjoyed yesterday has not carried over this morning,” said Patrick O’Hare at Briefing.com.
“Better than expected third quarter GDP and weekly initial claims data… has fueled concerns about Fed tightening” interest rates further and for longer, he added.
Revised Commerce Department figures now show the US economy expanded at a 3.2 percent annualised rate in July through September, up from a previous estimate of 2.9 percent.
Meanwhile, first-time and continuing jobless claims fell last week.
Both figures indicate that the US economy is still racing ahead at full tilt, while the Fed has indicated it will raise interest rates until it achieves a sufficient slowdown in activity to tame rampant inflation.
The drop in Wall Street equities “likely reflects the growing feeling of concern that the Federal Reserve will continue pushing rates upwards in the absence of any major economic distress signal”, said Joshua Mahony, senior market analyst at online trading platform IG.
“The bears are back in charge today,” he added.
Tech stocks took a beating after US computer storage memory manufacturer Micron posted softer-than-expected earnings, with its shares slumping 4.5 percent.
“Micron’s earnings did not provide any optimism for the chip sector as they struggle with an inventory glut that will make it difficult for them to be profitable,” said market analyst Edward Moya at trading platform OANDA.
Equities have been volatile in recent weeks as investors weigh up interest rate hikes and global recession risks against the reopening of China’s economy.
Thursday’s reaction of investors to good economic news was the opposite the day before, when a bigger-than-expected jump in US consumer confidence this month sent stocks soaring.
All three main indices on Wall Street ended more than one percent higher on Wednesday.
Asian stocks took their cue from those gains, led by Hong Kong which rose by more than two percent with tech firms tracking their US counterparts higher and property stocks boosted by comments from top Chinese officials pledging support for the beleaguered sector.
Towards the end of the day, Shanghai dipped on worries about rising Covid cases in China.
But hopes for a Santa rally – a period of rising share prices around the year-end holidays – were crushed as the momentum failed to carry over into European trading.
London ended the day down 0.4 percent, while Paris shed 1.0 percent and Frankfurt fell 1.3 percent.
“Bye-Bye Santa rally, Grinch selloff is here to stay,” said OANDA’s Moya.
Elsewhere on Thursday, oil prices steadied after recent strong gains in reaction to falling US stockpiles that left crude inventories at their lowest levels in eight years.
- Key figures around 1630 GMT -
New York - DOWN 1.4 percent at 32,912.38 points
EURO STOXX 50: DOWN 1.3 percent at 3,823.29
London - FTSE 100: DOWN 0.4 percent at 7,469.28 (close)
Frankfurt - DAX: DOWN 1.3 percent at 13,914.07 (close)
Paris - CAC 40: DOWN 1.0 percent at 6,517.97 (close)
Tokyo - Nikkei 225: UP 0.5 percent at 26,507.87 (close)
Hong Kong - Hang Seng Index: UP 2.7 percent at 19,679.22 (close)
Shanghai - Composite: DOWN 0.5 percent at 3,054.43 (close)
Dollar/yen: DOWN at 132.34 yen from 132.38 yen on Wednesday
Euro/dollar: DOWN at $1.0596 from $1.0613
Pound/dollar: DOWN at $1.2029 from $1.2082
Euro/pound: UP at 88.11 pence from 87.81 pence
Brent North Sea crude: DOWN less than 0.1 percent at $82.17 per barrel
West Texas Intermediate: UP 0.2 percent at $78.45 per barrel