Updated at 4:15 pm ET
Socks ended lower Thursday, while the dollar held gains against global peers, as investors continue to closely-track interest rate markets heading into next week’s Fed meeting.
Markets were given a modest pre-market boost after the White House brokered an an agreement with union representatives and railway workers to prevent a crippling strike slated to begin later this week.
The Biden Administration had been facing a midnight Friday deadline to broker an agreement between railway operators and unions representing around 60,000 members amid a long-running dispute over working conditions, wages and employee safety
Stocks are still deeply in the red when compared to Monday’s closing levels, however, following the biggest sell-off in two years on Tuesday, triggered by a faster-than-expected reading for August inflation and a corresponding surge in rate hike expectations from the Federal Reserve.
The odds of an unprecedented 100 basis point move, which would be the biggest since 1984, are holding firm at around 26%, based on data reflected in the CME Group’s FedWatch, with bets on follow-on hikes likely to lift the Fed Funds rate to between 4.25% and 4.5% by the end of February.
The demand component of the inflation surge was also in focus Thursday with the publication of August retail sales data at 8:30 am Eastern time.
August retail sales rose 0.3% to a collective $683.3 billion, the Commerce Department said, well ahead of the Street consensus forecast of a 0.1% decline. Stripping out the auto sector, retail sales were down 0.3%, the report noted, while stand-alone sales of gasoline fell 4.2% as prices retreated from the record high $5.017 per gallon hit during the month of June.
With sales rising 9.1% from last year, showing gains on a volume basis, however, investors will find comfort in the fact that consumers are using the cash saved from lower pump prices to spend across different sectors of the economy.
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Bond markets, in the meantime, continue to flash concerned recession warnings, with the difference between 2-year note yields — which are trading at 3.86%, the highest levels since 2007 — now some 40 basis points higher than the yield on 10-year notes.
The dollar index, meanwhile, was up slightly in New York trading to 109.70, while the euro slipped below parity to 0.9994.
The currency and bond market moves have set a backdrop that has stocks struggling to find traction in a market where good economic news only increases the chances of deeper rate hikes, while inflation data itself isn’t slowing fast enough to allow for bets on a pause in the Fed’s tightening cycle.
European stocks were marked 0.8% lower by the close of trading in Frankfurt, following on from a 0.2% bump for the Nikkei 225 in Tokyo and a 0.16% dip the region-wide MSCI ex-Japan index.
On Wall Street, the S&P 500 finished down 1.13%, while the Dow Jones Industrial Average fell 173 points, or 0.56%, 30,961. The tech-focused Nasdaq dropped 1.43%.
Railway shares were active following the Biden-brokered deal with union members, with CSX Corp (CSX) shares down 3.39% and Union Pacific (UNP) shares ending slightly higher to $218.38 each. Norfolk Southern (NSC) gained 0.3%.
Walt Disney (DIS) shares fell 1.53% despite an upbeat address from CEO Bob Chapek at a tech and media sector conference late Wednesday in San Francisco.
In other markets, an historic ‘merge’ of two blockchain networks, one of which underpins the world’s second-largest cryptocurrency, was completed last night, creating what could be a significant challenge to bitcoin’s dominance in the digital token market.
Ether tokens were last seen 5.8% lower on the session and changing hands at $1,505.34 each.