U.S. stocks reverse losses as Treasury yields slip while Powell warns more interest rate hikes may be in store

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U.S. stocks swung higher on Thursday, reversing earlier losses as Treasury yields slipped after the 10-year traded close to the 5% mark.

Meanwhile, investors remained focused on Federal Reserve Chairman Jerome Powell, who warned that the central bank might not be finished raising interest rates, even as he lauded a reduction in inflationary pressures.

How are stocks trading

  • The S&P 500
    SPX
    was marginally higher at 4,316.

  • The Dow Jones Industrial Average
    DJIA
    was marginally lower at 33,653.

  • The Nasdaq Composite
    COMP
    gained 21 points, or 0.3%, at 13,335.

On Wednesday, the Dow fell 333 points, or 1%, to 33,665, snapping a three-day winning streak as main indexes turned lower for the week.

What’s driving markets

Markets looked past concerns about an escalating conflict between Israel and Hamas and focused on Powell’s comments on Thursday. The Fed chair said the central bank may need to push borrowing costs even higher as inflation remains stubbornly persistent despite having slowed from last year’s four-decade highs.

“In any case, inflation is still too high, and a few months of good data are only the beginning of what it will take to build confidence that inflation is moving down sustainably toward our goal. We cannot yet know how long these lower readings will persist, or where inflation will settle over coming quarters,” Powell said in his prepared remarks.

See: Fed’s Powell: Live coverage of pivotal speech as bond yields surge

See also: Powell says more strong data like September reports could warrant further interest-rate hikes

Investors remained focused on bond yields as the 10-year Treasury yield rose,
BX:TMUBMUSD10Y
moving to within a few basis points of 5% as it climbed to its highest level since the summer of 2007 earlier on Thursday. But as Powell spoke, yields pared their initial advance, and were recently up less than one basis point on the day at 4.905%.

Other Fed officials making comments on Thursday include Chicago Fed President Austan Goolsbee speaking in Madison, Wisconsin, at 1:20 p.m., and Fed Vice Chair for Supervision Michael Barr speaking at a Boston Fed conference at 1:30 p.m.

Labor-market data released Thursday came in stronger than expected, as the number of Americans who applied for unemployment benefits last week fell to a nine-month low of 198,000, defying expectations that layoffs would rise as higher U.S. interest impact the economy.

Meanwhile, a gauge of regional business activity published by the Philadelphia Fed remained in contractionary territory for the second straight month in October.

Housing-market data showed home sales in September fell to the lowest level since 2010, as high mortgage rates continue to deter buyers and sellers alike. Sales of previously owned homes fell by 2% to an annual rate of 3.96 million in September

Meanwhile, the third quarter corporate earnings reporting season moves on, with results from AT&T
T,
+7.51%
and Blackstone
BX,
-6.00%,
which surpassed expectation. Reports from Western Alliance Bancorp
WAL,
+0.60%,
CSX
CSX,
+0.80%
and Intuitive Surgical
ISRG,
-0.52%
were set to follow after the bell.

In terms of the wider market the results late Wednesday from Netflix
NFLX,
+15.25%
and Tesla
TSLA,
-9.31%
have pretty much canceled each other out, with shares in the streaming giant jumping 12.5% on well-received numbers but the electric vehicle maker losing 7% following cautious comments from Elon Musk.

Tesla was the only member of the Magnificent 7 to trade in the red Thursday, while shares of Amazon.com Inc.
AMZN,
+0.90%
and AI darling Nvidia Corp.
NVDA,
+0.74%
were notably higher.

Companies in focus

  • Equifax Inc. shares
    EFX,
    +1.12%
    sank after the credit-score agency cut its outlook for the year, over concerns that high mortgage rates are causing mortgage credit inquiries to track at a 37% decline for the year.

  • American Airlines Group Inc.
    AAL,
    +2.07%
    bounced sharply off a three-year low into positive territory Thursday, even after the air carrier reported third-quarter revenue that came up a bit short and provided a downbeat profit outlook.

  • Las Vegas Sands 
    LVS,
    +3.50%
    saw its shares jump, bringing up other casino stocks, after it noted a recovery at its resorts in Macau and Singapore.

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