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Investing.com — The Dow ended flat after climbing late into close on Thursday as investors weighed further remarks from Federal Reserve officials calling for more rate hikes, stoking concerns about a deeper recession.
The Dow Jones Industrial Average was flat, or 7 points lower, the Nasdaq fell 0.35%, and the S&P 500 fell 0.30%.
St. Louis Federal Reserve President James Bullard insisted that rate hikes need to be increased further to reach a “sufficiently restrictive level” to cool inflation.
Bullard, who tends to lean hawkish, suggested the Fed’s benchmark rate would need to rise to a 5% to 7% range.
Signs that the job market remains resilient – as weekly jobless claims fell short of expectations – strengthened the prospect of a more hawkish Fed and stoked renewed concerns about a Fed-induced recession.
“We had thought that last week’s increase might have been the start of a gradual move to higher levels, but there was no follow-through this week. Instead, claims remain in the historically low range that has held since mid-August,” Jefferies said in a note.
A key part of the Treasury yield curve, the 10-year yield over the two-year yield, inverted – a key recession indicator – by the most since 2019.
Consumer stocks led the broader market move lower, pressured by a more than 4% slump in Norwegian Cruise Line after Credit Suisse downgraded its rating on the cruise stock to underperform from outperform, citing valuation concerns.
Norwegian Cruise Line (NYSE:NCLH) “has outperformed materially YTD and we see risk to estimates/valuation vs peers,” Creidt Suisse said. Royal Caribbean Cruises Ltd (NYSE:RCL) and Carnival Corporation (NYSE:CCL) fell nearly 4% and 1%, respectively.
Retailers including Bath & Body Works (NYSE:BBWI) and Macy’s helped soften the blow in consumer stocks.
Bath & Body Works rallied more than 25% after reporting blowout earnings in the third quarter and raising its outlook on the full year. The stronger results were “due largely to a better merchandising margin rate and SG&A expense favorability,” Goldman Sachs said in a note.
Macy’s (NYSE:M) also lifted guidance after reporting a third-quarter results that beat Wall Street estimates on the top and bottom lines, sending its shares more 15% higher.
Kohl’s Corp (NYSE:KSS) withdrew its guidance for the full-year, citing macroeconomic uncertainty, though its quarterly results also topped analysts’ estimates.
Following the slew of earnings seen so far, and in the midst of the volatile macro environment, Goldman Sachs said it favored consumer staples-oriented retailers including Walmart Inc (NYSE:WMT), McDonald’s Corporation (NYSE:MCD), Constellation (NYSE:STZ), and Monster Beverage Corp (NASDAQ:MNST), against discretionary names including Williams-Sonoma Inc (NYSE:WSM).
In tech, meanwhile, chip stocks were slightly higher following a slump a day earlier as NVIDIA Corporation’s (NASDAQ:NVDA) better-than-expected quarterly results lifted sentiment on the sector.
Alibaba Group Holdings Ltd ADR (NYSE:BABA) rallied more than 7% despite reporting quarterly results that missed on the top line.
