US close: Wall Street finishes lower after Powell's second testimony

Wall Street finished lower on Thursday as investors sifted through a slew of economic data, and digested Fed Chair Jerome Powell’s second testimony this week.

The Dow Jones Industrial Average was down 1.68% at 24,608.98, the S&P 500 lost 1.33% to 2,677.67, and the Nasdaq 100 was off 1.52% at 6,750.54.

Investors had been on edge since Tuesday when a hawkish first congressional testimony by Powell spooked markets by adding weight to expectations of four rate hikes rather than three this year.

“Powell’s testimony in front of the House Financial Services Committee on Tuesday was very bullish on the economy and led many to believe that a fourth-rate hike is on the table this year,” Oanda analyst Craig Erlam said earlier in the day.

“While this isn’t a million miles from what markets are pricing in, it did trigger another negative response from markets with US indices falling around two and a half percent since and positioned for further losses today.”

On Thursday, Powell testified in front of the Senate Banking Committee, telling the senators that there weren’t yet any “decisive” signs of wage inflation.

He also said more gains could be made in the US labour market without creating harmful levels of inflation.

“We see wages by a couple of measures trending up a little bit, but most of them continuing to grow at two and a half percent,” Powell said.

“Nothing is suggesting to me that wage inflation is at a point of accelerating.

“I would expect that some continued strengthening in the labor market can take place without causing inflation.”

Powell confirmed the Fed expected to continue its trajectory of gradual interest rate hikes, in a bid to keep economic growth under control while not putting the kibosh on the economy’s recovery.

He also faced questions about why the central bank was lifting interest rates, when inflation continued to miss its own target.

“At this point, we have 4.1% unemployment,” he explained.

“The things we don't want to have happen is to get behind the curve, have inflation move up and have to raise rates too quickly and cause a recession.”

In economic news, personal income and spending printed ahead of forecasts at the start of the year, alongside a hefty 0.9% jump in disposable incomes as recently approved tax cuts kicked-in, according to figures from the Department of Commerce.

Despite that, key inflation gauges contained within the same report - including the Federal Reserve's preferred inflation index - came in just as expected, rising at the same clip as in December.

At the headline level, the year-on-year rate of gain on the price deflator for personal consumption expenditures held at 1.7%, while at the 'core' level, excluding food and energy, the PCE price index came in at 1.5%.

Meanwhile, personal income and spending rose by 0.4% and 0.2% month-on-month, respectively, which was ahead of economists' forecasts for a reading of 0.2% for both measures.

Elsewhere, the number of Americans filing for unemployment benefits hit its lowest level in 49 years last week, according to data from the Labor Department.

US initial jobless claims declined by 10,000 to 210,000 from the previous week’s level, which was revised down by 2,000. Economists had been expecting claims of 226,000. This marked the lowest level of claims since 6 December 1969, when it was 202,000.

The manufacturing sector was also in focus following releases from the Institute for Supply Management and IHS Markit.

IHS Markit’s final manufacturing purchasing managers’ index slipped to 55.3 from January’s 34-month high of 55.5, but data from the ISM showed growth in the manufacturing sector unexpectedly rose in February, to its strongest rate in almost 14 years.

The ISM’s headline manufacturing index increased to 60.8 from 59.1 in January, beating expectations for a drop to 58.7.

A reading above 50 indicates expansion, while a reading below signals contraction.

“This indicates growth in manufacturing for the 18th consecutive month at strong levels led by continued expansion in new orders, production activity, employment and inventories, with suppliers continuing to struggle delivering to demand,” said Timothy Fiore, chair of the ISM.

“The PMI at 60.8 is the highest level of expansion seen since May 2004, when it reached 61.4.”

In corporate news, Best Buy added 3.95% after seeing its sales jump during its key holiday trading quarter, and Kohl's slipped 5.05% despite its own strong holiday sales fuelling a big earnings beat.

AMC Entertainment ticked ahead 1.67% following the release of its quarterly earnings that showed a record fourth-quarter revenue.

Elsewhere, Victoria’s Secret parent L Brands lost 13.87% after its quarterly outlook late on Wednesday left investors disappointed.

Software company Salesforce.com picked up 2.72% on the back of better-than-expected quarterly results.

Dow Jones - Risers

Coca-Cola Co. (KO) $43.43 0.49%
Verizon Communications Inc. (VZ) $47.96 0.46%
Procter & Gamble Co. (PG) $78.70 0.23%
Chevron Corp. (CVX) $112.04 0.11%
Travelers Company Inc. (TRV) $138.97 -0.02%
Walt Disney Co. (DIS) $102.57 -0.55%
General Electric Co. (GE) $14.02 -0.64%
Exxon Mobil Corp. (XOM) $75.20 -0.71%
Unitedhealth Group Inc. (UNH) $224.45 -0.76%
Merck & Co. Inc. (MRK) $53.70 -0.96%

Dow Jones - Fallers

Boeing Co. (BA) $349.69 -3.46%
United Technologies Corp. (UTX) $130.30 -3.25%
Intel Corp. (INTC) $47.84 -2.94%
Caterpillar Inc. (CAT) $150.23 -2.85%
American Express Co. (AXP) $95.14 -2.35%
Goldman Sachs Group Inc. (GS) $256.78 -2.34%
Cisco Systems Inc. (CSCO) $43.80 -2.19%
Dowdupont Inc. (DWDP) $68.74 -2.13%
Visa Inc. (V) $120.40 -2.07%
Johnson & Johnson (JNJ) $127.28 -2.00%

S&P 500 - Risers

United States Steel Corp. (X) $46.01 5.75%
NRG Energy Inc. (NRG) $26.92 4.10%
Best Buy Co. Inc. (BBY) $75.30 3.95%
Southwestern Energy Co. (SWN) $3.71 3.92%
Range Resources Corp. (RRC) $13.77 3.61%
Endo International Plc (ENDP) $6.53 3.57%
Teradata Corp. (TDC) $38.13 3.56%
Nucor Corp. (NUE) $67.53 3.26%
Newell Brands Inc (NWL) $26.50 3.15%
Cabot Oil & Gas Corp. (COG) $24.93 3.12%

S&P 500 - Fallers

Patterson Companies Inc. (PDCO) $24.10 -23.67%
Brown Forman Corp. Class B (BF.B) $55.38 -20.65%
Monster Beverage Corp (MNST) $54.22 -14.44%
L Brands Inc (LB) $42.49 -13.87%
Mallinckrodt Plc Ordinary Shares (MNK) $15.68 -6.00%
Kohls Corp. (KSS) $62.75 -5.05%
Discover Financial Services (DFS) $75.20 -4.58%
Cummins Inc. (CMI) $160.76 -4.33%
Henry Schein Inc. (HSIC) $63.44 -4.15%
Nvidia Corp. (NVDA) $232.21 -4.05%

Nasdaq 100 - Risers

Shire Plc Ads (SHPG) $133.48 4.28%
Liberty Global plc Series C (LBTYK) $30.86 2.76%
Liberty Global plc Series A (LBTYA) $31.87 2.34%
T-Mobile Us, Inc. (TMUS) $61.90 2.13%
Walgreens Boots Alliance, Inc. (WBA) $70.20 1.90%
CSX Corp. (CSX) $54.52 1.49%
Dollar Tree Inc (DLTR) $104.09 1.41%
Seagate Technology Plc (STX) $54.00 1.12%
Mylan Inc. (MYL) $40.69 0.92%
Comcast Corp. (CMCSA) $36.54 0.91%

Nasdaq 100 - Fallers

Monster Beverage Corp (MNST) $54.22 -14.44%
Align Technology Inc. (ALGN) $245.55 -6.46%
Liberty Interactive Corporation QVC Group (QVCA) $27.56 -4.55%
Biomarin Pharmaceutical Inc. (BMRN) $77.67 -4.31%
Henry Schein Inc. (HSIC) $63.44 -4.15%
Nvidia Corp. (NVDA) $232.21 -4.05%
Take-Two Interactive Software Inc. (TTWO) $107.54 -3.87%
PACCAR Inc. (PCAR) $69.04 -3.56%
Tesla Inc (TSLA) $330.93 -3.54%
Intuitive Surgical Inc. (ISRG) $412.13 -3.36%