Market Snapshot: U.S. stocks end lower Thursday as investors digest rising rates and tech rout

What drove markets?

Selling on Wall Street continued Thursday, a day after markets were rocked by the release of minutes from the Federal Open Market Committee meeting in mid-December, which showed officials not only talked about quicker and more frequent interest-rate hikes but also about a more aggressive wind-down of its $8.9 trillion balance sheet than the last time it reduced it.

Comments from St. Louis Fed President James Bullard on Thursday may have further rattled investors, with the central banker saying publicly that the Fed could raise as early as March.

“We’re going to have to show everyone that we will take action to keep inflation low and stable and try to hit our 2% inflation target,” Bullard  said in prepared remarks at an event on Thursday.

The yield on the 10-year Treasury
TMUBMUSD10Y,
1.723%
was 1.733% on Thursday, rising about 24 basis points so far in the new year, according to Dow Jones Market Data.

Higher rates are particularly troublesome for growth stocks that are richly valued on the promise of high future earnings. The ARK Innovation ETF
ARKK,
-0.63%,
a proxy for highly speculative tech companies, slumped over 7% on Wednesday and fell 0.6% Thursday.

Read: These tech stocks have fallen 20% to 51% from their 52-week highs. Should you consider buying now?

“Growth companies had been the main beneficiaries of extraordinarily low real and nominal interest rates, which pushed valuations to elevated levels. As the Fed begins to normalize policy, it’s logical that these stocks will face the strongest headwinds, similar to what we saw on Wednesday. Within the U.S. equity market, we continue to have a preference for value stocks over growth stocks,” said Mark Haefele, chief investment officer of global wealth management at UBS.

Data showed first-time jobless claims rose slightly last week to 207,000, but remained near a 52-week low. Claims rose from a revised 200,000 in the previous week. Economists polled by The Wall Street Journal had expected initial claims to total a seasonally adjusted 195,000 in the seven days ended Jan. 1.

The Institute for Supply Management said its services index dropped to 62% last month from a record 69.1% in November. Readings above 50% signal expansion and numbers above 60% are considered exceptional.

One bright note Thursday was the S&P 500 Energy Sector, which is now up 9% this week, and on pace for its best week since March 5, 2021 when it rose 10% according to Dow Jones data.

Which companies were in focus?

• Shares of Bed Bath & Beyond Inc.
  BBBY,
  +7.97%
  initially tumbled in premarket trade after the retail company reported a surprise fiscal third-quarter loss and sales that missed expectations. But shares bounced back to close up almost 8%.

• Walgreens Boots Alliance Inc.
  WBA,
  -2.89%
  shares fell 2.9% after the pharmacy retailer reported fiscal first-quarter results that beat expectations and raised its full-year guidance.

• Shares of Constellation Brands Inc.
  STZ,
  -3.38%
  were down 3.4% after the company said its third-quarter net income fell to $470.8 million, or $2.48 per Class A common share from $1.28 billion, or $6.68 a share in the year-ago period.

• Despite a concerted effort by retail traders on social media proclaiming Thursday as #AMCDay, shares in the meme stock movie chain AMC Entertainment
  AMC,
  -1.27%
  closed down 1.3% but the spotlight on meme stocks did appear to carry GameStop
  GME,
  +1.28%
  to a gain of 1.3%.

How did other assets trade?

• The ICE U.S. Dollar Index
  DXY,
  +0.06%,
  a measure of the currency against a basket of six major rivals, eked out a gain of 0.1%.

• Oil futures saw strong gains, with the U.S. benchmark
  CL00,
  +2.26%
  closing up 2.1% to settle at $79.46 a barrel. Gold futures
  GC00,
  -1.92%
  fell $35.90, or 2%, to finish at $1,789.20.

• Bitcoin
  BTCUSD,
  +0.04%
  was down1.4%.

• The Stoxx Europe 600
  SXXP,
  -1.25%
  closed1.3% lower, while London’s FTSE 100
  UKX,
  -0.88%
  declined 0.9%.

• The Shanghai Composite
  SHCOMP,
  -0.25%
  fell 0.3%, while the Hang Seng Index
  HSI,
  +0.72%
  rose 0.7% and Japan’s Nikkei 225
  NIK,
  -2.88%
  dropped 2.9%.

Additional reporting by Steve Goldstein