Upbeat economic data couldn’t overcome the resistance stocks faced from disappointing corporate performance and persistent banking fears.
First, the promising news (at least when it comes to inflation). April’s wholesale prices in the U.S. rose 0.2% for the month, less than the Dow Jones estimate of 0.3%. That translates to a 2.3% year-over-year increase, down from March’s 2.7% and the lowest since January 2021. In another sign inflation might be coming under control, initial jobless claims increased by 22,000 to 264,000 for the week ended May 6, according to the Department of Labor. That’s the highest reading since Oct. 30, 2021.
But that news didn’t shield markets from other fears. “Investor focus is now on both the economic backdrop and liquidity and what’s going on versus rates and inflation,” said Dylan Kremer, co-chief investment officer of Certuity.
And liquidity — or, in other words, the health of banks and their willingness or ability to make loans — was in focus again Thursday. PacWest shares tumbled, along with other regional banks like Zions Bancorp, which lost 4.5%, and KeyCorp, which fell 2.5%. The SPDR S&P Regional Banking ETF slid 2.5% Thursday.
Another big loser on Thursday was Disney, which sank 8.7% after the media giant reported it had lost subscribers from its Disney+ streaming service. That’s the largest one-day fall, in percentage terms, since Nov. 9, when the company slumped 13%.
Disney’s shares dragged down both the S&P 500, which declined 0.17%, and the Dow Jones Industrial Average, which slid 0.66%. However, the Nasdaq Composite managed to add 0.18%. The tech-heavy index was boosted by a 4.3% jump in Alphabet shares, which are trading at their highest level since August, thanks to investors’ optimism around the artificial intelligence products the tech giant announced at its annual developers conference.
After a heavy week of economic data releases, investor focus will turn to the looming debt ceiling in the U.S. Unease over a potential sovereign default has already spread through markets. For instance, yields for short-term T-bills have jumped sharply this month. Still, most economists and bankers — including JPMorgan CEO Dimon — expect the U.S. to avoid defaulting. It’s hard to imagine what would happen if they were proved wrong.
