US close: Stocks test technical support despite lower-than-expected CPI

The sell-off on Wall Street continued on Thursday, despite a lower-than-expected reading on consumer prices, as market participants tried to tried to figure out just how high the central bank would lift interest rates, even as they mulled over the uncertain backdrop on trade with China, the upcoming mid-term elections and stockmarket valuations.

In any case, while not all analysts expressed heightened concern around the stockmarket rout, there did appear to be a majority of cautious views.

Commenting on the price action, Mickey Levy, at Berenberg Capital Markets, said: "The sizeable stock market corrections in February and then March did not harm confidence — all surveys have hovered near all-time highs.

"But, with valuations higher, the Fed normalizing monetary policy, and markets nervous about rising bond yields, along with ongoing uncertainties about Washington, DC and the future thrust of policies, it may be more difficult for the markets to rebound as quickly from this correction, and confidence seems a bit more vulnerable. We will be monitoring these measures closely."

Strategists at Barclays had sounded a similar note even before the opening bell in London, suggesting that there could be more falls to come.

"Fundamentals have not changed but we expect volatility to remain elevated in the short term and do not recommend buying this dip," Barclays said.

At the closing bell, the Dow Jones Industrial Average was down by 2.13% or 545.91 points to 25,052.93 while the S&P 500 was 2.06% or 57.31 points weaker at 2,728.37, taking the latter's fall over the preceding six sessions to 5.8% and nearer to wiping-out its year-to-date gains.

The tech-laden Nasdaq Composite meanwhile lost 1.25% or 92.99 points to finish at 7,329.06, having managed to edge into the green briefly at one point early in the session.

To take note of, the S&P 500 closed right atop its so-called 50-week moving average. The 200-day moving average on the other hand appeared to be at risk, although the 200-week average remained well below then current levels at roughly 2,347.

Volatility in stocks continued to pick-up.

The CBoE's VIX volatility gauge tacked-on 8.80% to 24.98, with gold futures up by 2.87% alongside to $1,227.70/oz. and West Texas Intermediate crude oil sliding 3.16% to $70.86 a barrel.

Predictably, 10-year Treasury yields ended two basis points lower at 3.14%, helped in part by what some market commentary described as a solid auction on Thursday afternoon for $15bn in 30-year Treasuries.

Donald Trump was quick to throw in his two cents on Wednesday's selloff. Speaking to reporters before a political rally in Pennsylvania, he reportedly said: "Actually it's a correction that we've been waiting for a long time, but I really disagree with what the Fed is doing. I think the Fed has gone crazy."

Speaking at the IMF's annual meeting in Bali, the head of the International Monetary Fund, Christine Lagarde, pushed back at Trump, claiming interest rate rises he had dismissed as "ridiculous" were "legitimate and necessary".

In corporate news, shares of Walgreens were down 1.95% following the release of its mixed fourth-quarter earnings, while Delta Airlines cruised 3.56% higher after its third-quarter profit beat analysts' estimates.

Electric car maker Tesla was down 1.81% after founder Elon Musk denied a report late on Wednesday that James Murdoch was favourite to replace him as chairman of the company.

On the data front, the cost of living in the States slowed a tad more quickly than expected last month on the back of a large drop in the price of second-hand vehicles and energy.

In September, the rate of increase in headline consumer prices ebbed to 0.1% month-on-month after a 0.2% rise in the month before, according to the Department of Labor.

Versus a year ago, CPI rose at a pace of 2.3%, which was down from August's clip of 2.7% (consensus: 2.4%).

Just as important, some economists said that, at least in the very near-term, CPI would continue to slow.

Be that as it may, Ian Shepherdson at Pantheon Macroeconomics said: "The Fed is focused on the very tight and tightening labor market and the threat of much faster wage gains, which the current zero level of real short rates will do nothing to constrain.

"Rates are being raised because of future inflation risk; these numbers don’t change that, and in any event a reversion to the core trend, 0.2%, is a very good bet for October."

For his part, Oliver Jones at Capital Economics said: "The 5% drop in the S&P 500 so far this week suggests that investors are starting to factor in the prospect of the US economy slowing in response to tighter monetary policy.

"We think that this will start to happen in 2019, causing equities in the US and elsewhere to fall much further by the end of next year, as well as forcing the Fed to stop hiking rates and pushing Treasury yields down."

Dow Jones - Risers

Microsoft Corp. (MSFT) $105.91 -0.24%
Dowdupont Inc. (DWDP) $58.98 -0.57%
Nike Inc. (NKE) $74.51 -0.57%
Apple Inc. (AAPL) $214.45 -0.88%
Goldman Sachs Group Inc. (GS) $212.97 -0.89%
Intel Corp. (INTC) $44.23 -1.27%
Walt Disney Co. (DIS) $111.15 -1.52%
Caterpillar Inc. (CAT) $141.00 -1.91%
American Express Co. (AXP) $101.59 -1.92%
Walgreens Boots Alliance, Inc. (WBA) $70.90 -1.95%

Dow Jones - Fallers

Visa Inc. (V) $133.73 -6.03%
Exxon Mobil Corp. (XOM) $81.60 -5.68%
Travelers Company Inc. (TRV) $124.30 -5.54%
Unitedhealth Group Inc. (UNH) $257.07 -4.81%
United Technologies Corp. (UTX) $129.37 -4.79%
Pfizer Inc. (PFE) $42.80 -3.84%
Chevron Corp. (CVX) $118.43 -3.40%
Cisco Systems Inc. (CSCO) $44.12 -3.31%
Walmart Inc. (WMT) $93.92 -3.26%
Procter & Gamble Co. (PG) $78.84 -3.25%

S&P 500 - Risers

Murphy Oil Corp. (MUR) $35.46 11.61%
Newmont Mining Corp. (NEM) $32.71 7.07%
L Brands Inc (LB) $30.21 5.93%
Freeport-McMoRan Inc (FCX) $13.23 3.60%
Delta Airlines Inc. (DAL) $51.48 3.56%
Altaba Inc. (AABA) $59.93 2.60%
Microchip Technology Inc. (MCHP) $67.70 1.90%
CF Industries Holdings Inc. (CF) $51.13 1.57%
Qorvo, Inc. (QRVO) $71.39 1.56%
CA Inc. (CA) $43.47 1.49%

S&P 500 - Fallers

Fluor Corp. (FLR) $46.53 -17.24%
Tenet Healthcare Corp. (THC) $25.43 -13.18%
Frontier Communications Co. (FTR) $5.90 -12.46%
Tapestry Inc. (TPR) $42.68 -10.67%
Tiffany & Co. (TIF) $111.09 -9.65%
United Rentals Inc. (URI) $139.84 -8.45%
Vulcan Materials Co. (VMC) $100.37 -8.04%
VF Corp. (VFC) $85.46 -7.69%
Valero Energy Corp. (VLO) $106.90 -7.57%
Southwestern Energy Co. (SWN) $5.32 -7.48%

Nasdaq 100 - Risers

Ctrip.Com International Ltd. Ads (CTRP) $35.15 3.53%
JD.com, Inc. (JD) $23.48 3.39%
Baidu Inc. (BIDU) $198.00 1.93%
Microchip Technology Inc. (MCHP) $67.70 1.90%
CA Inc. (CA) $43.47 1.49%
Maxim Integrated Products Inc. (MXIM) $51.52 1.46%
Facebook Inc. (FB) $153.35 1.30%
Twenty-First Century Fox Inc Class A (FOXA) $45.11 1.10%
Wynn Resorts Ltd. (WYNN) $116.22 0.96%
Illumina Inc. (ILMN) $307.45 0.88%

Nasdaq 100 - Fallers

Mylan Inc. (MYL) $32.60 -5.73%
Dollar Tree Inc (DLTR) $79.51 -5.60%
Applied Materials Inc. (AMAT) $32.79 -4.76%
Mercadolibre Inc. (MELI) $304.86 -4.45%
Nvidia Corp. (NVDA) $235.13 -4.30%
Celgene Corp. (CELG) $80.71 -4.18%
Alexion Pharmaceuticals Inc. (ALXN) $119.31 -3.77%
QUALCOMM Inc. (QCOM) $64.29 -3.66%
Amgen Inc. (AMGN) $193.85 -3.65%
Dish Network Corp. (DISH) $31.87 -3.57%